Jerome Powell Won’t Cut Interest Rates, So Trump Keeps Calling Him Stupid

WASHINGTON — President Donald Trump is frustrated that his top central banker won’t cut interest rates to make it easier for businesses and consumers to borrow and spend money.

In recent days, Trump has repeatedly trashed Federal Reserve Chair Jerome Powell, originally appointed by Trump himself during his first term in the White House, as just a stupid guy.

“I think he’s terrible,” Trump said Wednesday at a NATO summit in the Netherlands, echoing similar insults from last week. “He’s an average mentally person. I’d say low in terms of what he does, low, low IQ for what he does.”

The Fed hiked interest rates starting in 2022 in response to inflation caused largely by the coronavirus pandemic, and Trump is mad that the rates haven’t yet come all the way down even though inflation has mostly subsided.

“We have no inflation. We have a tremendous economy,” Trump said Wednesday.

Lower rates could boost the economy and possibly Trump’s approval rating, but the Fed has maintained higher rates because of Trump’s signature economic policy: tariffs on goods imported from other countries. It’s basic economics that tariffs, which are taxes, could lead to higher prices and higher inflation.

As Powell said Wednesday in testimony to the Senate Banking Committee, “Increases in tariffs this year are likely to push up prices and weigh on economic activity.”

Trump himself said the federal government had brought in significant revenue from tariffs so far: “Hundreds of billions of dollars of tariff money is pouring in. Factories are being built because they don’t want to pay the tariffs, so they’re building them all over the country.”

The president also suggested he has three or four candidates in mind to replace Powell, whose term as chair is up next May. In April, Trump threatened to fire Powell, potentially triggering a major legal battle, but backed off, partly because doing so would have rattled financial markets. Still, Trump’s political attacks on the Fed are a break from political norms honoring the independence of the Fed from partisan politics. Last week, when the Fed again refused to cut rates, which amounted to an act of defiance against Trump, the president called him “a stupid person.”

In two hearings on Capitol Hill this week, Powell repeatedly parried gripes from Republicans about interest rates. Rep. Bill Huizenga (R-Mich.), for instance, complained during a Financial Services Committee hearing that other countries’ central banks had cut rates: “Why aren’t we doing what the rest of the world is doing?”

“If you just look in the rear-view mirror and look at the existing data that we’ve seen, you can make a good argument that that would call for us to be at a neutral level, which would be, you know, a couple of cuts or maybe more,” Powell said. “The reason we’re not is the forecast by all professional forecasters that I know of on the outside and the Fed do expect a meaningful increase in inflation over the course of this year.”

Powell acknowledged it’s not clear exactly how much Trump’s tariffs could boost prices, but that the Fed’s currently elevated interest rates, in the 4.25% to 4.50% range, put the central bank in a good position to respond in case prices do start rising, something he said could happen sometime this summer.

“The question is who’s going to pay for the tariffs,” Powell said. “Originally it’s the importer, but it gets passed along through the distribution chains, to some extent, to the consumer. The ultimate question of it is how much of it does show up in inflation, and, honestly, it’s very hard to predict that in advance.”