Powell Holds the Line: Fed Chair Defies Political Pressure as Inflation Battle Rages

With the 2024 election looming, Jerome Powell’s Fed stays laser-focused on taming prices—even as Trump lobs criticism from the campaign trail. The central bank’s independence faces its toughest test yet. Will policymakers blink? Don’t bet on it—career economists still outnumber political appointees... for now.

In Brief

• Donald Trump is pressuring Jerome Powell for a rapid interest rate cut.
• The latter refuses to yield, relying on solid economic data, including inflation still high at 2.5%.
• The job market remains robust, with low unemployment, which does not justify immediate monetary intervention.
• Trump’s tariff policies increase the risks of stagflation, according to the Fed.
• The Fed’s independence is reaffirmed, considered essential to preserving economic stability.

A Showdown Between Donald Trump and Jerome Powell

For several weeks, Donald Trump has publicly criticized Jerome Powell, even going so far as to call him a “loser” and threatening to fire him. The current White House occupant is betting on a rate cut to stimulate growth and strengthen his economic agenda. But the Fed, led by Jerome Powell, believes it is not yet the right time.

Inflation remains above the 2% target, still reaching 2.5% in February according to the PCE indicator. Moreover, the job market remains strong, with low unemployment and sustained consumption. All these factors lead Fed officials to hold back.

A Stable but Uncertain Economy

Regional Fed officials, such as Mary Daly (San Francisco) and Susan Collins (Boston), highlight the current uncertainty related to Donald Trump’s trade policies, particularly his high tariffs. These could fuel persistent inflation and slow growth, favoring a feared stagflation scenario.

“Monetary policy is well positioned“, summarizes Lorie Logan, president of the Dallas Fed, refusing any rush in such a volatile context.

The Fed’s Independence, a Reassuring Pillar

Despite political pressure, the Fed maintains its independence from the White House. For investors, this autonomy is crucial. As Evercore ISI analysts remind us, Jerome Powell’s independence is essential to guarantee economic stability in the face of inflation risks linked to Trump’s political choices.

Jerome Powell stays the course. As long as the data does not justify a cut, the Fed will remain firm despite Donald Trump’s criticism.

Jerome Powell remains steadfast against Donald Trump’s pressures, favoring a cautious approach based on economic data. In a context marked by uncertainty and inflationary tensions, the Fed defends its independence and keeps its course to ensure the long-term stability of the American economy.

Maximize your Cointribune experience with our "Read to Earn" program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.