US President Donald Trump is set to replace the outgoing Federal Reserve Chairman in the near future, with a potential list now narrowing down to just four candidates, Financial Times reported. Trump had a thorny relationship with the outgoing chairman, Jerome Powell, as they differed on the central bank’s interest rate-cut policy.
“We’re going to be looking at a couple different people, but I have a pretty good idea of who I want,” the president told reporters before boarding the Airforce One.
Why Trump Wants Lower Interest Rates?
Ever since assuming the presidency, Trump has been keen to deliver on his primary campaign promise: economic revival. However, the recovery project has faced several major roadblocks during the first 11 months or so, including the ongoing tariff/trade war against China and a host of other major countries. While Trump claims that the intergovernmental conflict has been positive for the US overall, economic growth has slowed due to these trade restrictions.
Trump has bragged about tariffs for quite some time now, and it is reported that he understood there would be economic consequences of restricting trade. This is where he wanted the Federal Reserve to help him out. The bank’s primary duty is to manage supply and demand in the economy by setting the interest rate, which has been on the higher side since 2022.
The reason is that a trillion-dollar-plus stimulus entered the economy during the pandemic. As a result, inflation was running rampant across the country, affecting consumers across the board. So, the bank had to step in and implement higher rates.
The jacked-up rate represents the Quantitative Tightening (QT) policy that helps bring down inflation, which it did, but it also contracts the economy as capital disappears from the system. Trump inherited a high interest rate, and after going headfirst into another major economic tussle because of the tariffs, he wanted the Fed to cut rates immediately to help his cause.
However, Jerome Powell refused to budge and only started enforcing rate cuts in the last few months as the economy came under increasing pressure. Under US law, a President has no authority to remove the Fed chairman position. Still, Trump did unleash a major tirade on his Truth Social outlet and threatened Powell extensively for months.
The Future
With Powell gone and reportedly Treasury Secretary Scott Bessent at the helm, Trump will have a loyalist in the highest office of the country’s central bank. Aggressive rate cuts could be on the menu for the near future. Critics argue that these aggressive reductions could make inflation troublesome for the country once again, thereby trapping the Fed in a vicious cycle.
Source: https://zycrypto.com/federal-reserve-leadership-change-looms-as-trump-seeks-chairman-aligned-on-interest-rate-policy/
