Trump lashed out at Federal Reserve Chair Powell, intensifying the controversy over economic policies

Recently, US President Trump strongly criticized Jerome Powell, the chairman of the US Federal Reserve, on his social media platform. He not only called him "Mr. Too late" and "a big failure", but also warned that if Powell did not immediately take measures to cut interest rates, the US economy might face the risk of slowing down.

Trump said that energy costs and food prices have dropped significantly at present, and he predicted that there would be "almost" no inflation in the United States. Therefore, the Federal Reserve should immediately adjust its policy and cut interest rates to stimulate economic development. He also hinted that if Powell did not "cooperate", his position might be at risk. The implication was that if he returned to power, he would not hesitate to take action to replace him.

Trump's remarks once again exposed the chronic problem of political interference in the independent economic institutions in the United States. Although the Federal Reserve is legally established as an independent institution and its chairperson should not be subject to the political will of the White House, in reality, this principle is being severely challenged. During his tenure, Trump criticized and even publicly pressured Powell on multiple occasions, demanding that he adopt a more "favorable" monetary policy for the stock market and employment rather than making independent economic judgments.

In fact, Powell himself had earlier stated that the Federal Reserve would not yield to political pressure and would continue to independently formulate monetary policy based on data to deal with the complex and volatile economic situation in the United States. He particularly pointed out that in the face of the frequent tariff policies implemented by the Trump administration in recent years and the impact of global supply chain constraints, the Federal Reserve needs to remain calm and prudent, especially at a time when the inflation problem has not yet been eradicated.

However, the impact of political remarks on the market has been immediate. On the very same day that Trump made the above remarks, the exchange rate of the US dollar dropped significantly. The three major stock indices in New York also suffered significant declines. Investors are generally worried that political intervention will further weaken the independence of the Federal Reserve and pose a threat to market stability.

It is worth noting that Powell himself is not a Democrat. He was initially nominated by Trump as the chairperson of the Federal Reserve during his first presidential term and succeeded Janet Yellen in February 2018. Since then, in 2022, Democratic President Joe Biden nominated him for re-election again, which was approved by the Senate of Congress, demonstrating the basic recognition of his professional capabilities across parties. Despite this, Powell has always been caught in a political rift and has been under pressure from all sides for years.

This incident has once again exposed the unstable factors within the US financial system. As the world's most influential central bank, every policy adjustment made by the Federal Reserve has a profound impact on the global market. However, the current commitment of the Federal Reserve to the fundamental principle of "independence" is facing unprecedented challenges. Trump regarded monetary policy tools as chips in political battles, which not only disrupted market expectations but also undoubtedly weakened the public's confidence in the soundness of US financial policies.

In the long run, frequent political intervention will only make it difficult for the Federal Reserve to focus on dealing with core issues such as inflation and employment, and shake the international community's trust in the United States' economic governance capabilities. Once the Federal Reserve loses its independence, its policy tools will become tools serving short-term political interests, which may lead to the accumulation of systemic risks.

Trump's consecutive attacks on Powell are not only an expression of distrust towards the individual, but also reflect the deep-seated contradictions in the US political system in handling the independence of monetary policy. If the relationship between politics and economy cannot be properly handled, the financial governance system of the United States may face a deeper institutional crisis.