President Donald Trump berated Jerome Powell for years as he sought to pressure the then-Federal Reserve chairman to cut interest rates.So far, he’s given a pass to the new Fed chief, Kevin Warsh, whom Trump nominated earlier this year.Now, not even four months into Warsh’s tenure, the honeymoon might be over.
The president has ratcheted up his calls for an interest rate cut in recent weeks, setting the stage for a potential showdown after Wednesday’s decision from Fed policymakers.Warsh faces a “time to choose,” as economists at UBS put it: Will the Fed hold its key rate steady yet again in the face of rising inflation, or will the central bank increase the rate to battle stubbornly high prices — and potentially enrage the president? Trump adviser Kevin Hassett, chair of the National Economic Council, said he thinks the “president will have something to say about it” if the Fed makes a “big move” with rates.(Hassett was a candidate for the Fed job before Trump picked Warsh.) “The president will have an opinion about it,” Hassett told CNBC on Friday.
“I’m sure he believes that there’s plenty of room for interest rates to go down, and he voices that opinion while respecting the independence of the Fed.” The Fed has not raised interest rates since 2023, when Joe Biden was president and the economy was contending with sky-high inflation.But market odds for an interest rate increase Wednesday were at more than 90% as of Tuesday, after inflation data for August came in hot at a 3.4% annual clip.
The Fed’s target for inflation is 2%.‘Just do your own thing’When Warsh took office in May, Trump said he wanted the new central bank chairman to just focus on the job.“Don’t look at me, don’t look at anybody, just do your own thing and do a great job,” Trump said at the time.
This was a stark contrast with the insults Trump hurled at Powell, whom the president nominated to be Fed chair during his first term.Trump hasn’t insult...