President Donald Trump isn’t the first president who is disappointed with the Federal Reserve Bank and its chairperson.
But he’s certainly the most vocal.
The president has made it perfectly clear that he’s extremely angry that the Federal Reserve and particularly Fed Chair Jerome Powell are not doing his bidding by cutting interest rates drastically.
Since taking office in January, President Trump has been demanding the independent central bank lower interest rates by up to 3 percentage points.
After holding the benchmark Federal Funds Rate steady all year, the central bank executed quarter-percentage-point cuts in September and in October.
The funds rate sits currently at 3.75% to 4.00%.
The December vote at first appeared to be a coin toss, but markets are pricing in a near 88% chance of another quarter-percentage-point cut when the Federal Open Market Committee meets Dec. 9-10.
Still, that easing of monetary policy isn’t enough for the president and his allies.
Trump Trump has verbally attacked Powell personally and professionally over the Fed’s policy-making decisions, with the kind of name-calling most likely heard among third-grade troublemakers (e.g., “nincompoop”).
For the president, those quarter-percentage-point cuts were not large enough to keep the economy out of recession or stagflation, boost the stagnant housing market, and reduce billions in interest on the nation’s debt.
Photo by Andrew Harnik on Getty Images
Kevin Hassett emerges as front-runner to replace Powell: report
Powell’s term as chair is up in May.
Traditionally, the search for a new chair would take place one to two months before the current chair stepped down. When it became clear to the White House that firing Powell was most likely illegal, President Trump and his supporters started an active search this summer to find a replacement to “shadow” Powell until May.
More Federal Reserve:
- Fed’s Miran pivots on interest-rate cut push for December
- Fed official sends strong signal on December interest-rate cut
But an exclusive Bloomberg report Nov. 25 said White House National Economic Council Director Kevin Hassett is the front-runner to be the next Fed chair.
Bessent heads the search to replace Powell
White House Press Secretary Karoline Leavitt said in a cheeky statement Nov. 25 that “Nobody actually knows what President Trump will do until he does it. Stay tuned!”
Fed chair and governor picks are historically the most direct way a president can influence the central bank.
Treasury Secretary Scott Bessent is leading the search to replace Powell as chair.
Bessent’s mission is to find a candidate who will not only support slashing interest rates but who has the trust of both the president and global financial markets.
Bessent told CNBC on Nov. 25 that there’s a good chance President Trump could announce his Fed chair selection within the next month, before the Christmas holiday.
With Hassett, Bloomberg’s anonymous sources said the president would have a close ally whom the president knows well and trusts.
Hassett candidacy raises some eyebrows
Hassett told Fox News on Nov. 20 that he would “be cutting rates right now” if he were the chair of the Fed because “the data suggests that we should.”
Hassett has also criticized the central bank for losing control of inflation in the wake of the pandemic.
Related: Frontrunner emerges in White House search for new Fed chair: report
Neil Dutta of Renaissance Macro Research predicted that Hassett could have trouble corralling other members of the Fed’s interest-rate setting Federal Open Market Committee to support his views.
“I don’t think Hassett will have an easy go of things next year if he’s chair,” he said.
“He also looks like the one most easily bullied by Trump. Bessent less so,’’ Dutta told Bloomberg.
President seeks control of independent central bank
The Fed has repeatedly served as a punching bag for the president, who lambasted Powell, calling him “too late” to cut borrowing costs and publicly musing about firing him.
President Trump has also assailed the cost of renovations on the central bank’s headquarters in Washington.
He has attempted to fire Fed Governor Lisa Cook over unproven allegations of mortgage fraud, a case that will be heard by the Supreme Court in late January.
Cook has maintained her innocence. The Fed has said in a statement it would abide by the court’s ruling.
President Trump drops a subtle hint
The president told reporters Nov. 30 aboard Air Force One that he had made his choice but declined to provide a name.
In September, he said that Hassett, along with ex-Fed official Kevin Warsh and current Fed Governor Christopher Waller, were his top three candidates.
Many economists are concerned that the appointment of an individual like Hassett, who has publicly aligned with the White House’s push for faster and more aggressive interest rate cuts, could erode the Federal Reserve’s traditional independence.
Kyle Rodda, a senior financial market analyst at Capital.com, has suggested that Hassett, a Trump loyalist and noted dove, might be inclined to keep interest rates low.
Related: Fed splits ahead of key December meeting as rate-cut debate grows
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