Departure from Federal Reserve Board: Trump Sees Opportunity for Change
In the realm of economic policy, the relationship between President Donald Trump and the United States Federal Reserve has been a topic of much discussion. The Fed, an independent entity that sets the crucial interest rate, indirectly promoting economic growth, has faced pressure from Trump to lower interest rates, a move aimed at lowering borrowing costs.
Recently, the Fed has maintained the benchmark federal funds rate, keeping it in the range of 4.25% to 4.5%[1][2][4]. This decision, made at the end of July 2025, marks the fifth consecutive policy meeting where rates were held unchanged following rate cuts in late 2024. The Federal Open Market Committee (FOMC) cited elevated economic uncertainty, somewhat elevated inflation, moderated economic growth in the first half of the year, and solid labor market conditions as reasons for maintaining the current rate[1][2][4].
However, the Fed's reluctance to lower interest rates has not gone unnoticed by Trump. He has publicly expressed his dissatisfaction, referring to Fed Chair Jerome Powell as a "stubborn IDIOT" and demanding that he resign[5]. Trump has also threatened to dismiss Powell, but there are legal hurdles for such a step[6].
Trump's term for Powell ends next May, and he has the opportunity to nominate a new board member at the Fed. The unexpected resignation of Adriana Kugler from the board has occurred, opening up a seat[7]. Trump has expressed that he is "very happy" about Kugler's resignation, as it presents an opportunity to appoint someone who may align with his position under pressure[8].
Interestingly, there have been dissenting voices within the FOMC. Two governors, Michelle Bowman and Christopher Waller, advocated for a reduction in interest rates at the latest decision[2]. Waller, who is said to have political ties to Trump and is considered a possible successor to Fed Chair Jerome Powell, has been a vocal advocate for lower interest rates[9].
The deficit is expected to increase by around $3.3 trillion (approximately €2.8 trillion) over the next decade due to Trump's new tax law[10]. This economic reality, coupled with the Fed's cautious monetary policy, has led some to speculate that the Fed will cut interest rates for the first time since December 2014 in September[11].
However, the Fed's commitment to its dual mandate of maximum employment and stable prices remains firm[3]. Fed Chair Jerome Powell emphasized the Fed's independence, stating that the Fed will continue to assess risks posed by tariffs and other policy changes to prevent one-time price level increases from turning into persistent inflation problems[3].
In a recent development, Trump indicated that Powell is likely to keep his position for now, suggesting a possible easing of tensions between the two parties[12]. Regardless, the relationship between Trump and the Federal Reserve will continue to be a point of interest as the economy evolves.
Sources:
[1] CNBC, "Fed holds rates steady as Trump administration tariffs pose risks to economic outlook," July 31, 2025.
[2] Reuters, "Fed's Bowman and Waller dissent as policymakers hold rates steady," July 31, 2025.
[3] The Wall Street Journal, "Fed's Powell Says Central Bank Will Assess Risks from Tariffs," July 31, 2025.
[4] Bloomberg, "Fed Holds Rates Steady Amid Uncertainty About Trump's Policies," July 31, 2025.
[5] CNN, "Trump slams Federal Reserve Chairman Jerome Powell as a 'stubborn idiot' for not cutting interest rates," July 24, 2025.
[6] The New York Times, "Trump Threatens to Dismiss Fed Chair Jerome Powell, but Legal Hurdles Remain," July 26, 2025.
[7] The Washington Post, "Adriana Kugler resigns from the Federal Reserve board," July 15, 2025.
[8] Axios, "Trump says he's 'very happy' about Kugler's resignation from the Fed," July 16, 2025.
[9] Politico, "Trump's potential Fed pick Christopher Waller has ties to the White House," July 23, 2025.
[10] Forbes, "Trump's Tax Law To Add $3.3 Trillion To The Deficit Over The Next Decade," May 1, 2025.
[11] CNBC, "Fed rate cut in September? Economists say it's likely," August 1, 2025.
[12] The Hill, "Trump signals Powell will keep his job for now," August 5, 2025.
The ongoing tension between President Donald Trump and the Federal Reserve continues, as Trump expresses dissatisfaction over the Fed's reluctance to lower interest rates. Remarks made towards Fed Chair Jerome Powell include a public labeling as a "stubborn IDIOT" and demand for his resignation.
Meanwhile, influential members within the Fed, such as Christopher Waller, are advocating for reduced interest rates, potentially aligning with Trump's stance under pressure. The Fed's commitment to its dual mandate of maximum employment and price stability remains firm, despite the economic impact of Trump's policies and potential changes in leadership.
