Donald Trump is at it again, folks.
The president—never one to hold back his opinions on, well, anything—has launched another verbal grenade at Federal Reserve Chairman Jerome Powell. This time, Trump took to his social media platform Truth Social to label Powell a "fool" who "doesn't have a clue" before adding that backhanded compliment we've all used at some point: "Other than that, I like him very much!"
What sparked this latest outburst? Nothing dramatic. Powell simply suggested he'd like to understand how Trump's proposed tariffs might impact the economy before committing to interest rate cuts. The nerve of the man!
There's something almost nostalgic about Trump returning to his Fed-bashing ways. During his presidency, these attacks were as reliable as sunrise—a constant in an otherwise unpredictable administration. I remember covering a particularly heated episode in 2019 when Trump compared Powell to an "enemy" of the state. Good times.
A Relationship Complicated By Reality
The dance between presidents and Fed chairs has always been awkward. Presidents crave booming economies to boost their reelection chances. Fed chairs, meanwhile, have the thankless job of maintaining price stability—sometimes by making unpopular decisions that cool economic growth.
Most presidents handle this tension behind closed doors. Not Trump. He prefers the bullhorn approach.
What makes this particularly rich is that Powell—a Trump appointee, lest we forget—has actually signaled a dovish turn lately. The Fed is widely expected to cut rates this year, possibly several times, as inflation cools. But for Trump, who has consistently demanded lower rates regardless of economic conditions, Powell's methodical, data-dependent approach feels like unnecessary foot-dragging.
I've spoken with several economists who believe Trump's frustration stems from a fundamental misunderstanding of how monetary policy works. Or perhaps he understands perfectly well but sees political advantage in the criticism. (You think?)
"Too Late Jerome" – A Nickname With Half a Point
Trump's nickname for Powell—"Too Late Jerome"—isn't entirely off-base. There is legitimate criticism that the Fed was slow to recognize inflation's persistence in 2021, then compensated with rapid rate hikes that might have overshot. Many market participants do believe the Fed might now be moving too cautiously in the opposite direction.
But here's where it gets interesting... and by interesting, I mean deeply ironic.
Trump is lambasting Powell for being cautious about rate cuts even as economists warn that Trump's own proposed tariffs could reignite inflation—which would argue against the very rate cuts Trump is demanding!
It's like criticizing your doctor for not prescribing medication while simultaneously engaging in the very behavior that makes that medication dangerous. Make it make sense, as the kids say.
The Political Pretzel of Monetary Policy
Look, what's fascinating here is how completely scrambled the politics of monetary policy have become. Traditionally, Republicans championed tight money and fiscal restraint. Democrats typically favored easier monetary conditions and were less concerned about deficits.
Trump turned this completely upside down. He pushed relentlessly for low rates while implementing tax cuts that expanded the deficit. This created a bizarre realignment where Democrats now often position themselves as the adults in the fiscal room while Trump-aligned Republicans push for looser monetary policy regardless of inflation concerns.
This realignment extends to trade policy, too. Trump's embrace of protectionism represents another sharp break from traditional Republican free-trade orthodoxy, and it's precisely these tariff proposals that now complicate Powell's decision-making.
The Powell Pickle
Poor Jerome Powell. (And I mean that sincerely—having covered his press conferences since 2018, I've watched the man age in real time.)
He's stuck in an impossible position. During the inflation surge, progressives blasted him for raising rates too aggressively, potentially causing unnecessary economic pain. Now Trump attacks from the opposite direction, demanding faster rate cuts.
Meanwhile, Powell keeps trying to make decisions based on data rather than political pressure—a concept that seems increasingly quaint.
The thing is, Powell's caution regarding Trump's tariff proposals isn't foolish—it's entirely reasonable. Significant new tariffs would absolutely affect prices and economic growth in ways that monetary policy would need to account for. Wanting to understand those potential impacts before committing to a rate path isn't hesitation—it's basic competence.
But "basic competence" doesn't generate many retweets or Truth Social replies, does it?
What Happens Next?
As November approaches, these Fed-bashing episodes will almost certainly intensify. Trump knows his base responds to this messaging, and it creates a convenient scapegoat if economic conditions deteriorate.
The real question isn't whether Trump will continue attacking Powell—that's as certain as humidity in August—but whether these attacks might eventually undermine the Fed's independence and credibility.
After all, central bank independence isn't just some academic concept beloved by economists with elbow patches. It's a practical framework that helps shield monetary policy from the short-term political pressures that have created disastrous inflation in countries where that independence doesn't exist.
For now, markets seem to be shrugging off these presidential tirades as background noise. Traders have largely learned to filter out the social media bluster from actual policy signals.
But in an era where institutional norms face constant pressure, the relationship between 1600 Pennsylvania Avenue and the Marriner S. Eccles Building deserves our attention—regardless of who occupies either address come January.
Because when it comes to the economy, words matter. Sometimes almost as much as interest rates themselves.
