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Donald Trump has warned Jay Powell not to cut US interest rates ahead of the November presidential election, but said he would let Powell serve out his term if elected if he was “doing the right thing”.
The Republican candidate acknowledged in an interview with Bloomberg News that the central bank would “probably” cut interest rates before the Nov. 5 election, but added that “the central bank knows it shouldn’t do that.”
Trump He also addressed growing concerns in financial markets about the politicization of the Fed, including attempts to remove Powell from his position before his term ends in 2026.
“I would let him serve out his term,” the former president said, “especially if I think he’s doing the right thing.” The interview with Bloomberg was conducted in late June but made public on Tuesday at the Republican National Convention in Milwaukee.
Investors worry that the Fed will try to oust Powell, who is widely seen on Wall Street as an effective chairman and has successfully steered monetary policy. Federal Reserve We just experienced one of the worst inflation shocks in decades.
But Trump’s reservations about wanting Powell to “do the right thing” may leave doubts about the Republican nominee’s promise not to seek an early replacement.
Powell said on Monday that the central bank Greater confidence Inflation is approaching the Fed’s 2% target, strengthening expectations that the central bank will cut interest rates for the first time since 2020 at its September meeting, just six weeks before the election.
Trump has relentlessly attacked President Joe Biden over the economy, blaming his Democratic rival for soaring inflation as the coronavirus pandemic disrupts global supply chains and energy costs soar after Russia’s invasion of Ukraine.
Trump repeatedly attacked Powell during his presidency for not lowering interest rates amid the trade war, despite nominating him for the position in 2017. He once asked whether Powell was a bigger enemy to the U.S. than Chinese President Xi Jinping.
If President Trump were to try to choose a replacement for Powell before his term ends, he would likely face legal challenges, set up a clash with the central bank and risk market volatility.
The Fed is debating when to cut interest rates from a 23-year high of 5.25% to 5.5%, where they have remained since July last year, as officials signal that easing inflation pressures and a cooling labor market may soon justify lower borrowing costs.
The Federal Reserve’s political independence has long been considered essential to its ability to manage the U.S. economy, and Chairman Powell has stressed that the Fed’s decisions are based solely on the health of the economy.
“Our responsibility is to make decisions when and where we need to, based on the data that’s coming in, the evolving outlook and the balance of risks, without taking into account other factors,” he told congressional leaders earlier this month. “And that will include political factors.”
In the Bloomberg interview, Trump also took aim at Taiwan, saying it should pay the United States for implicit security guarantees provided by the U.S. military.
Repeating his claim that Taiwan “stole our semiconductor business,” he said: “Taiwan should pay for our defense. We are no different from an insurance company. Taiwan has given us nothing.” Taiwan buys U.S.-made weapons for its defense forces, while the U.S. also regularly provides military aid.
China claims Taiwan as part of its territory and has threatened to attack if Taipei refuses to submit to its rule indefinitely. The United States has long acted as a de facto guarantor of Taiwan’s security, making vague but clear promises to help Taiwan defend itself.
Under U.S. law, the Taiwan Relations Act, Washington considers any attempt to determine Taiwan’s future by non-peaceful means a grave concern for the United States and is committed to providing Taiwan with defensive weapons and maintaining a U.S. capability to resist force or coercion that threatens Taiwan’s security.
Noting that Taiwan is 9,500 miles from the United States but only 68 miles from China, Trump said Beijing “could bomb Taiwan” and was only hesitant because it would destroy Taiwan’s semiconductor manufacturing industry, which produces more than 90 percent of the world’s most advanced semiconductors.
