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The stories that matter about money and politics in the race for the White House
Donald Trump has warned Jay Powell against cutting US interest rates ahead of November’s presidential vote, but said if elected he would let the Federal Reserve chairman serve out his term if he was “doing the right thing”.
The Republican nominee acknowledged in an interview with Bloomberg News that the central bank would “probably” cut interest rates ahead of the Nov. 5 election, but added that “it’s something they know they shouldn’t do.”
Trump also addressed growing concerns in financial markets that he would politicize the Fed, starting with an effort to force Powell out before his term as Fed chairman ends in 2026.
“I would let him serve it,” the former president said. “Especially if I thought he was doing the right thing.” The interview with Bloomberg was conducted in late June, but was released during the Republican convention in Milwaukee on Tuesday.
Investors have worried that the former president would seek to oust Powell, who is widely seen on Wall Street as an effective chair, guiding the Fed through one of its worst inflation shocks in decades.
But Trump’s warning that he wanted to see Powell do “the right thing” may leave some questions about the Republican nominee’s promise not to push for his early replacement.
Powell said on Monday that the central bank was gaining more confidence that inflation was easing back to the Fed’s 2 percent target, adding to expectations that the central bank would make its first rate cut since 2020 at its meeting in September, just six weeks. before the elections.
Trump has relentlessly attacked President Joe Biden on the economy, blaming his Democratic rival for a spike in inflation as the Covid-19 pandemic gripped global supply chains and energy costs soared following Russia’s full-scale invasion of Ukraine.
Despite appointing Powell to serve as chairman in 2017, Trump repeatedly attacked the Fed chair during his tenure as president for not cutting interest rates amid his trade wars. He once asked whether the Fed chair was a bigger enemy to the US than Chinese President Xi Jinping.
A push by Trump to replace Powell before the end of the chairman’s term would likely face a legal challenge, trigger a clash with the central bank and risk significant market volatility.
The Fed has been debating when to cut its key rate from a 23-year high of 5.25-5.5 percent, a level held since last July. With price pressures easing and the labor market cooling, officials have signaled that a reduction in borrowing costs will soon be guaranteed.
The Fed’s political independence has long been considered essential to its capacity to manage the US economy. Powell has emphasized that her decisions are based only on the health of the economy.
“Our effort is to make decisions when and as they need to be made, based on incoming data, the evolving outlook and the balance of risks, rather than other factors,” he told congressional leaders earlier this month. . “It will involve political factors.”
In the Bloomberg interview, Trump also took aim at Taiwan, saying the island nation should repay the US for the implied security guarantee provided by the US military.
Repeating a claim that Taiwan “stole our chip business,” he said: “Taiwan should pay us for protection. You know, we’re no different than an insurance company. Taiwan doesn’t give us anything.” Although Taiwan buys American-made weaponry for its defense forces, the US also regularly provides military aid.
China claims Taiwan as part of its territory and threatens to attack it if Taipei refuses to submit to its control indefinitely. The United States has long acted as the de facto guarantor of the island nation’s security with an albeit vague commitment to help it defend itself.
Under the Taiwan Relations Act, a US law, Washington considers any attempt to determine Taiwan’s future by non-peaceful means to be of grave concern to the US, and is committed to providing Taiwan with defensive weapons and maintaining the capability of US to resist force or coercion. that would endanger Taiwan’s security.
Noting Taiwan’s location 9,500 miles from the US and just 68 miles from China, Trump said Beijing “could bomb it” and was only reluctant because it would destroy the island’s chip-making industry. Taiwan produces more than 90 percent of the world’s most advanced semiconductors.