Former US President Donald Trump has reportedly issued a private warning to Federal Reserve Chair Jerome Powell, hinting at drastic repercussions if the central bank cuts interest rates before the November election. Sources close to Trump claim he believes such a move would be politically motivated to aid President Joe Biden’s re-election bid.
Trump’s Alleged Threats
According to insiders, Trump made the remarks during a private gathering in Washington, where he allegedly stated that Powell would face severe consequences if he pursued rate cuts. While Trump’s exact words remain undisclosed, the implication was clear: he views potential rate reductions as an attempt to sway the election in Biden’s favour.
Fed’s Independence Under Scrutiny
The Federal Reserve, traditionally an independent institution, has faced increasing political pressure in recent years. Trump’s latest comments raise fresh concerns about the erosion of its autonomy. Economists warn that political interference in monetary policy could destabilise markets and undermine economic confidence.
Market Reactions and Economic Implications
Investors are closely monitoring the situation, as any perception of political influence over the Fed could trigger volatility. The US economy remains fragile, with inflation still above target and growth slowing. A politicised Fed could further complicate the economic outlook.
Historical Context
This is not the first time Trump has clashed with Powell. During his presidency, Trump repeatedly criticised the Fed’s rate hikes, breaking with long-standing norms that presidents refrain from commenting on monetary policy. His latest remarks suggest a continuation of this confrontational approach.
What Happens Next?
With the election looming, the Fed’s decisions will be under intense scrutiny. Powell has previously emphasised the Fed’s commitment to data-driven policy, but Trump’s threats add an unpredictable element to an already high-stakes economic environment.
