Trump urges Fed board to 'ASSUME CONTROL' as 2 top officials say why they broke with Powell

Yahoo

4 days ago

President Trump said in a social media post Friday that the Federal Reserve Board should 'ASSUME CONTROL" as two Fed governors outlined why they broke with Chairman Jerome Powell on rates.
The president urged the Fed board, which Powell chairs, to "DO WHAT EVERYONE KNOWS HAS TO BE DONE' if Powell won't support lower interest rates.
His comments came just before Fed governors Christopher Waller and Michelle Bowman explained in new statements why they disagreed with Powell Wednesday and argued for a quarter percentage point rate reduction at the Fed's last meeting.
Both Waller and Bowman cited worries about the labor market as a reason to start cutting again.
'I believe that the wait and see approach is overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve,' Waller said in his statement.
Bowman added in her statement that the 'labor market has become less dynamic and shows increasing signs of fragility.'
It was the first time two Fed governors have dissented in a monetary policy decision since 1993.
The statements from Waller and Bowman came just 30 minutes before July's jobs report released Friday morning, which showed the US economy added fewer jobs than expected last month.
Trump seemed to praise the statements after they were released, saying on Truth Social: 'STRONG DISSENTS ON FED BOARD. IT WILL ONLY GET STRONGER!'
Trump's attempts to sway the Fed board marks another escalation in his campaign to pressure Powell. The president said Thursday that Powell is "TOO ANGRY, TOO STUPID, & TOO POLITICAL" to have his job.
Powell at a press conference Wednesday did not budge from his view that more time is needed to assess the impact of Trump's tariffs on inflation and the economy, saying that there is still a "a long way to go" to figure that out and "you have to think of this as still quite early days."
He also declined to say whether a cut was on the table for the Fed's next meeting in September and made it clear that inflation was still a concern as the Fed balances its dual mandate of stable prices and maximum employment.
"In the end, there should be no doubt that we will do what we need to do to keep inflation under control."
A new reading on inflation released Thursday showed price increases accelerated in June more than expected as inflation remained above the Fed's 2% target.
That new reading "will do little to ease the Fed's concerns about tariff-driven inflation," Capital Economics assistant economist Harry Chambers said in a Thursday note."If these pressures persist, as we expect, a September cut looks unlikely."
Traders on Thursday narrowed the odds of a cut in September, lowering them below 40%, but they raised them back above 55% following the release of Friday's weaker-than-expected jobs report.
Waller argued in his statement Friday that "the price effects from tariffs have been small so far, and since we will likely not get clarity on tariff levels or their ultimate impact on the economy over the course of the next several months, it is possible that the labor market falters before that clarity is obtained — if it ever is obtained.
"When labor markets turn, they often turn fast."
In her statement, Bowman also emphasized that the lasting inflationary impacts from tariffs are likely overstated and warned the labor market could turn south faster than current forecasts.
Bowman cautioned that economic growth has slowed more than some headline data may suggest, saying "underlying economic growth has slowed markedly." Specifically, Bowman cited a slowdown in private domestic final purchases — essentially spending on goods and services by US businesses.
Wednesday morning's second quarter GDP data showed this spending rose at an annualized rate of just 1.4% in the second quarter, the slowest since 2022. Headline GDP, in contrast, showed the economy expanded at a 3% rate in the second quarter.
"If demand conditions do not improve, firms may have little option other than to begin to lay off workers, recognizing that it may not be as difficult to rehire given the shift in labor market conditions," Bowman added.
Trump on Wednesday said he does expect a cut at the next meeting, telling reporters that "I hear they're going to do it in September."
The decision to keep rates on hold this week was expected to increase tensions with Trump, who has also in recent weeks been invoking a $2.5 billion renovation of the Fed's headquarters as a way to question the chair's management of the institution.
Trump had toned down his criticism in the week leading up to the Wednesday meeting. During a visit to the construction project last week, he said of firing Powell: "To do that is a big move, and I just don't think it's necessary."
Asked last Thursday what might lead him to back off the barrage of critiques that Trump has been leveling against Powell for weeks, the president said, "I'd love him to lower interest rates," before patting Powell on the back.
But following the decision to keep rates on hold for the fifth consecutive meeting, Trump turned back to a harsher view of the Fed chair in his posts.
'Jerome 'Too Late' Powell, a stubborn MORON, must substantially lower interest rates, NOW,' he said in his post Friday.
'IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE!'
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