President Trump will loom large over the Federal Reserve’s policy meeting this week, even if the central bank does what the market expects and keeps interest rates on hold.
Trump and other top White House officials have been hammering Fed Chair Jerome Powell for months over his wait-and-see rate stance and his insistence that more time is needed to assess how the president’s tariffs will affect the path of inflation.
The president took that message directly to the Fed last Thursday as he toured a $2.5 billion renovation of the central bank’s headquarters and confronted Powell in person while the two argued in front of reporters over the true costs of the project.
“I just want to see one thing happen, very simple: Interest rates have to come down,” the president told reporters.
Traders widely expect the Fed’s Federal Open Market Committee to defy Trump and once again keep rates unchanged this Wednesday, as they have for every other meeting so far in 2025. The market expects the first cut of 2025 to happen on Sept. 17, the third-to-last meeting of the year.
But at least two of Powell’s colleagues are warming to Trump’s near-term rate cut call, which could produce some disagreement this week behind closed doors in Washington.
One Fed governor, Christoper Waller, has already hinted that he may publicly dissent Wednesday if his colleagues vote to keep rates unchanged. His opinion is that any inflation from Trump’s tariffs will prove to be temporary, and he’s concerned that the labor market may soon worsen.
But many other Fed officials have backed Powell in his view that more time is needed to assess the impact of Trump’s tariffs on inflation. They also note that the labor market is holding up, removing any urgency to act in the way that Trump wants.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
“This is a campaign of undermining the chairman’s credibility and really trying to undermine his public support in the face of what I think is the real objective, and that is to get a lower rate environment in place,” former Kansas City Fed president Esther George said.
A Powell press conference following the meeting on Wednesday gives the Fed chair a new chance to respond to the White House’s escalating pressure campaign and mounting questions about the $2.5 billion renovation of two Fed buildings along the National Mall.
Trump considered firing Powell in recent weeks but has now appeared to back away from doing so, telling reporters this past week that “he is going to be out pretty soon anyway” — a reference to the fact that Powell’s term as chair is up in May.
While touring the Fed’s construction site on Thursday, Trump said of firing Powell: “To do that is a big move, and I just don’t think it’s necessary.”
Read more: How much control does the president have over the Fed and interest rates?
New headaches
But that doesn’t mean the White House is going to let up on Powell.
Treasury Secretary Scott Bessent this past week called for a review of the central bank’s $2.5 billion project and an “exhaustive internal review” of its non-monetary policy operations. He argued that “significant mission creep and institutional growth have taken the Fed into areas that potentially jeopardize the independence of its core monetary policy mission.”
The Fed also got another new headache last week when a money manager — and Trump ally who recently served as an adviser to the Department of Government Efficiency — filed a lawsuit arguing that the central bank is violating a 1976 federal law by keeping its policy meetings behind closed doors.
That money manager, Azoria Capital, is asking for a Washington, D.C., federal court to issue a temporary restraining order compelling the FOMC to open its deliberations to the public this week.
Some on Capitol Hill are also getting louder about more scrutiny of the Fed.
Rep. Dan Meuser of Pennsylvania, a subcommittee chair on the House Financial Services Committee, is reportedly moving forward with a congressional investigation of the Fed, according to PunchBowl News, even as many of his Senate colleagues have shied away from that idea.
Rep. Anna Paulina Luna of Florida, another Trump ally, formally requested that the DOJ investigate Powell for perjury over June comments about the renovations, although that is seen as a long shot at best.
House Speaker Mike Johnson said in an interview with Bloomberg reporters and editors last week that he is “disenchanted” with Powell and is even open to modifying the 1913 act that created the Fed.
That would be a major change, but it is not expected to come before Congress in the near term, as the House of Representatives went home Wednesday evening for a recess that is scheduled to last for the rest of the summer.
Powell has repeatedly stated that he does not intend to leave as chair until his term is up, that his removal is “not permitted by law,” and that he was honest and transparent about the Fed’s construction project while testifying before Senate lawmakers on June 25.
In a July 17 letter to White House budget director Russ Vought, Powell wrote that “we take seriously the responsibility to be good stewards of public resources” and offered a point-by-point response to Vought’s concerns about cost overruns and certain design elements.
Read more: What experts say about the possibility of additional rate cuts
‘I do think it’s damaging’
Trump and his allies have taken to several new lines of attack against Powell, even beyond the building renovation, as they argue for rates to be as many as three percentage points lower.
They cite what they predict will be savings on US debt if the rate is lower, as well as how a lower rate would make borrowing for a home less expensive in the US.
Trump has even hinted that he has more than just Powell to blame for the fact that rates have remained unchanged since he took office.
“The Board should act, but they don’t have the Courage to do so!” Trump wrote on his social media platform this past week, referring to the larger Fed Board of Governors on which Powell serves.
StoneX senior adviser Jon Hilsenrath told Yahoo Finance that he expects Trump’s attacks to eventually extend to the regional Fed presidents based around the country. They have rotating positions on the Fed body that makes the final call on rates.
The president does not appoint the regional Fed bosses, who are instead chosen by banks in those Fed districts.
One of them, Chicago Fed president Austan Goolsbee, defended Powell in a July 18 interview with Yahoo Finance, calling the Fed chair a “totally honorable guy.” He also expressed concerns about Fed independence.
“It pains me to hear people actively discussing whether the central bank should be independent. There’s nothing good can come of discussion like that.”
George, the former Kansas City Fed president, said of the president’s pressure campaign targeting building renovations: “I do think it’s damaging.”
“It’s when we undermine institutions and create suspicion in the public that something is wrong here, I think credibility suffers,” she said.
“This is a time when the Fed needs its independence,” George added. “It is a time when, yes, lower rates would help the federal government, but we know countries that have gone down that path, and we know in this country going down that path does not produce good outcomes in the long term.”
Last Thursday, though, Trump sounded confident during his tour of the Fed’s headquarters that Powell would see things his way.
“I think he’s going to do the right thing,” the president said. “Everybody knows what the right thing is.”
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