The Trump administration’s intensifying campaign against Federal Reserve Chair Jerome Powell hit a boiling point Thursday.
Just two weeks after President Donald Trump sent a handwritten letter to Powell demanding lower interest rates, Russell Vought, Trump’s director of the Office of Management and Budget (OMB), accused Powell of breaking the law by failing to comply with government oversight regulations and lying to Congress about details of an approximately $2.5 billion planned renovation of the Fed’s headquarters.
“The President is extremely troubled by your management of the Federal Reserve System,” Vought wrote in a letter he posted to social media Thursday. “Instead of attempting to right the Fed’s fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington D.C. headquarters.”
For months, Trump has berated Powell, whom he appointed during his first term, and called him insulting names. The president has lately taken to calling Powell by the nickname “Too Late” for failing to recognize the 2022 inflation crisis fast enough and failing to slash interest rates as inflation has cooled down. Earlier this month, Trump suggested that Powell should resign, in a social media post.
While some central banks, such as the European Central Bank and the Bank of Mexico, have lowered their benchmark lending rate a few times this year, the Fed has not. One big reason for that is the major policy shifts since Trump took office. Officials have said they want to see how those changes affect the economy first before considering further rate cuts.
Powell for his part has avoided responding to Trump’s harsh criticism, noting that the Fed is only focused on successfully taming inflation and preserving the labor market’s health. Central bankers don’t consider the government’s finances when determining policy moves.
The Fed did not immediately respond to CNN’s request for comment.
Laying the groundwork for firing “for cause”?
The latest criticism about the rising costs of the Fed’s headquarters may signal the administration is laying the groundwork to justify firing Powell, said Ed Mills, a policy analyst at Raymond James.
“The Supreme Court has made it very clear in their rulings that they would not support the president firing Powell,” Mills said. “So they can either find a reason to fire him for cause, or you create enough of a negative environment that Powell says, ‘it’s no longer worth it, I’m out.’”
However, firing Powell could send financial markets reeling: Mills warned that markets would not respond well to any indication that Powell, or another Fed chair, had lost their independence and was under the control of the president.
“I do think this could have the opposite impact of what they think it could,” Mills said. “If markets lose faith in the independence of the Fed, rates don’t go lower, they go higher.”
So the latest missive may instead be an effort to undermine Powell and turn sentiment against him.
Vought isn’t the only Trump administration official to slam Powell recently. In the past two weeks, Peter Navarro, the senior counselor for trade and manufacturing, wrote an op-ed calling Powell one of the worst Fed chairs in history; and Bill Pulte, head of the Federal Housing Finance Agency, called on Congress to investigate Powell.
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