By AP Economics Writer Christopher Al Gerber
WASHINGTON (AP) — President Donald Trump repeatedly attacked the Federal Reserve Chairman on Monday, demanding that central banks boost the economy by lowering key interest rates.
Trump called Powell the “major loser,” saying energy and groceries prices were “significantly low” and “virtually no inflation.” But Trump said the economy could slow down without interest rate cuts.
Petrol prices have declined over the past two months. This is because oil costs fell for fear of slower growth, but food prices jumped in January and March, leaving overall inflation that exceeded the Fed’s 2% target.
Trump’s comments drove the stock market and the dollar as US and foreign investors became increasingly wary of the US economic status on Friday.
The stock market, which quickly fell at the opening bell on Monday, fell further after Trump’s post, with the Dow dropping more than 1,000 points and the widest S&P 500 stock index down nearly 3% in noon trading. The dollar fell to its lowest level in three years.
The Federal Reserve was established as an independent body, and most economists believe that central banks without political interference will do a better job of curbing inflation. Otherwise, it would be even more difficult for the Fed to take unpopular measures to keep prices down, such as raising interest rates.
Treasury rates have risen in 10 years as Trump continues to implement aggressive tariff policies on his trading partners and attack Powell and the Federal Reserve. Interest rates rose again on Monday to 4.37%.
Investors usually buy US government bonds during market turmoil and cut yields, which means that when stock prices fall and Treasury yields rise, the value of losing the dollar is unusual. Instead, investors appear to be eschewing the US market due to perceptions of rising risk.
Trump also criticized Powell for being “too late” to raise interest rates. Powell and other Fed officials have long admitted they had waited for a long time to raise the fees when inflation first ignited in 2021.
But now, Powell emphasizes that the Fed faces a potentially “challenging scenario.” Trump’s tariffs can exacerbate inflation, and the Fed generally responds to price increases by increasing or raising its fees. However, the Fed can usually slow the economy down due to its obligation to counter with interest rate cuts.
“Our tool does just one of these two things at the same time,” Powell said last week.
As a result, Powell emphasizes that the Fed will remain on the sidelines as they wait to see how tariff policy works.
Trump assaulted him in Powell on Friday and said he could fire him if he wanted, but that touched on a legal battle that could possibly go to the Supreme Court. Powell said the president lacked the authority to fire him and made it clear that he would not resign until his term ends in May 2026.
When asked Friday if Powell’s firing was an option, Trump said “and his team will continue to study the matter,” he said. Hassett also accused Powell of acting politically.
Trump made similar claims in his true social post, denounced the Fed’s chairman last year, “to help sleepy Joe Biden, later Kamala get elected.” The Fed lowered its key rate three times in the second half of 2024 over concerns that inflation was cooled and employment was slower, but later recovered.
On Sunday, Louisiana Republican Sen. John Kennedy defended Powell on NBC’s Meet the Press, adding that he “doesn’t think the president, the president, has the right to fire the Federal Reserve Chairman.”
“The Federal Reserve should be independent,” he said.
Also on Sunday, Austan Ghoolsby, president of the Federal Reserve Chicago chapter, said on CBS’s “Face the Nation” it could undermine the Federal Reserve’s independence.
And William English, an economist at Yale Management School and former senior employee, said Trump’s attacks on the Fed “we don’t intend to make Americans better over time.”
“They’re likely to come with higher inflation, which isn’t what people want,” he said.
Original issue: April 21, 2025, 11:56am EDT
