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"Mr. Too Late"
President Donald Trump ramped up — and then quickly dialed back — his attacks on Federal Reserve Chair Jerome Powell this week. “… there is virtually No Inflation,” wrote the president on Truth Social on Monday. “… there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.” The administration has been reportedly exploring how to fire that “major loser” — Powell — according to Kevin Hassett, the chair of the White House National Economic Council.
In remarks on April 16, Powell indicated a need for “greater clarity” before shifting monetary policy, noting the inflationary effects of recent tariffs. By Thursday, when this newsletter was prepared, the president’s appetite to remove Powell appeared to have waned. “I have no intention of firing him,” Trump told reporters.
Fed chairs have never been immune to political pressure.
Richard Nixon encouraged his appointee, Arthur Burns, to push for a lower discount rate ahead of the 1972 election. That rate was more important to monetary policy than it is now, wrote Burton Abrams in the Journal of Economic Perspectives in 2006. “Good,” Nixon replied when Burns got the rate lowered to 4.5%. “You can lead ‘em. … Just kick ‘em in the rump a little.”
Interest rates later skyrocketed under Fed Chair Paul Volcker, who was appointed by Jimmy Carter. Volcker was reappointed by Ronald Reagan, whose administration privately pressured him not to raise interest rates ahead of the 1984 election, according to Volcker’s memoir, “Keeping at It.”
Publicly, Reagan carefully criticized monetary policy during the 1981-82 recession. But when asked about calls for Volcker’s resignation at a January 1982 news conference, Reagan said, “… the Federal Reserve System is autonomous. … There is no way I can comment on that.”
Reagan ultimately backed an independent Fed, said his former secretary of state, economist George Shultz, in a 2000 PBS interview. “… to do something difficult, even if you are the independent Federal Reserve, it makes a huge difference if the president is on your side and is strong and understands the problem …”
• Emily McCormick, vice president of editorial & research for Bank Director
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