Key Points

• U.S. President Trump on Monday again attacked Federal Reserve Chair Jerome Powell, calling him a "loser" and demanding an immediate interest rate cut, warning that otherwise the economy could slow.
• Trump's remarks came three days after his senior economic adviser said the White House was studying the possibility of removing Powell from his position.
• The market reaction was evident: the 10-year Treasury yield rose to 4.4%, and the U.S. dollar index fell 1%.

In-Depth Analysis

Trump took to social media on Monday to again target Federal Reserve Chair Powell, accusing him of weak monetary policy leadership and calling him a "loser." Trump wrote, "Unless 'Mr. Too Late' — a total loser — cuts rates now, the economy could slow." The remarks came three days after a senior White House economic adviser revealed that the administration was exploring the possibility of removing Powell from his post.

Since taking office in January, Trump has repeatedly pressured the Fed to cut interest rates. Powell has previously made clear that he will not resign at Trump's request and has repeatedly emphasized that any attempt to remove him from office would violate the law. Powell has also noted that the Fed's independence from political influence is key to effective monetary policy, a view consistent with consensus among economists.

"By and large, the independence of the Fed is broadly understood and supported in Washington and in Congress, and that's where it really matters," Powell said last Wednesday while answering questions after a speech.

The economy currently faces the risk of "stagflation" — that is, rising inflation while economic growth falls below potential — which creates a complex situation for the Fed in achieving its dual mandate of price stability and maximum employment, and also increases its vulnerability to external pressure. Powell acknowledged that in the coming months, the Fed may have to make trade-offs between curbing price increases and reducing unemployment.

"We could face a challenging situation where the goals of our dual mandate are in conflict," Powell said last Wednesday. He further explained, "As the economy slows, unemployment is likely to rise; and as tariff policies take effect, some of those costs will be borne by the public, and inflation could also move higher."

In his Monday remarks, Trump reiterated the accusations made by his senior economic adviser, claiming that Powell favors the Democratic Party. Trump wrote, "Powell is always 'too late,' except during elections — when he cut rates to help Sleepy Joe Biden, and later to help Kamala. How did that work out?"

In fact, the Fed cut the federal funds rate by 50 basis points in September 2024 (less than two months before the presidential election), which was the only rate cut before the November election last year. During Trump's first term, the Fed cut rates by 25 basis points at three consecutive meetings from August to October 2019. In March 2020, as the pandemic broke out, the Fed implemented two significant rate cuts that month, totaling 150 basis points, and subsequently eased policy multiple times to address high unemployment and stimulate economic growth.

In March 2022, during the Biden administration, the Fed began a cycle of rate hikes to curb rapidly rising inflation. By July 2023, the policy rate had been raised by a cumulative 500 basis points, marking the most aggressive tightening campaign in four decades. This year, with inflation persistently above the 2% target, the Fed has held rates steady at two consecutive meetings.

Powell has said repeatedly in recent times that the Fed is in no hurry to adjust borrowing costs and has emphasized the difficulty of accurately predicting the economic impact of Trump's high tariffs and changes in immigration, regulatory, and tax policies. "These policies are still evolving, and their impact on the economy is highly uncertain," Powell said last Wednesday.

Economists at several institutions have downgraded their economic growth forecasts for this year, including JPMorgan and Citigroup. The Conference Board projects that U.S. GDP will grow by only 1.6% this year, down from 2.8% in 2024. Justina Zabinska-La Monica, senior manager of business cycle indicators at the organization, said in a statement on Monday, "The slowdown in growth expectations reflects the impact of an intensifying trade war, which could lead to higher inflation, supply chain disruptions, reduced investment and spending, and a weaker labor market."