President Donald Trump has shown an uncanny penchant for negging public figures precisely when the largest audience is watching.
One could ask Bank of America CEO Brian Moynihan, whose arguably softball question to Trump at last week’s World Economic Forum in Davos, Switzerland, was met – eventually – with “I hope you start opening your bank to conservatives.”
Similarly, less than two hours after the Federal Open Market Committee voted unanimously Wednesday to hold the federal funds rate steady between 4.25% and 4.5%, Trump went after Federal Reserve Chair Jerome Powell.
“Because Jay Powell and the Fed failed to stop the problem they created with Inflation, I will do it by unleashing American Energy production, slashing Regulation, rebalancing International Trade, and reigniting American Manufacturing,” Trump wrote Wednesday on his Truth Social platform.
A Fed spokesperson declined to comment on Trump’s post.
But even before the post, the specter of Trump permeated the press conference to announce the interest-rate decision.
“I’m not going to have any response or comment whatsoever on what the president said. It’s not appropriate for me to do so,” Powell said Wednesday. There, Powell was referring to Trump’s “demand that interest rates drop immediately,” which the president relayed last week – again, at Davos.
The decision Wednesday not to alter the federal funds rate comes after three successive decreases, accounting for a full percentage point in total, over the past several months.
"The public should be confident that we will continue to do our work as we always have, focusing on using our tools to achieve our goals and really keeping our heads down and doing our work," Powell said. "That's how we best serve the public."
Powell said he has had "no contact" with Trump since the Davos comments.
But Trump didn’t stop at interest rates Wednesday.
“The Fed has done a terrible job on Bank Regulation,” the president wrote. “Treasury is going to lead the effort to cut unnecessary Regulation, and will unleash lending for all American people and businesses. If the Fed had spent less time on DEI, gender ideology, ‘green’ energy and fake climate change, Inflation would never have been a problem.”
It is unclear what Trump’s suggestion is for Treasury. Just one banking regulator, the Office of the Comptroller of the Currency, is a direct offshoot of the Treasury Department. Perhaps the boundary to which Trump is referring is that while the Fed manages the money supply in the U.S., Treasury manages the government’s money.
Still, Trump’s newly installed treasury secretary, Scott Bessent, told senators during his confirmation hearing that he believed the FOMC “should be independent” when it comes to monetary policy matters.
When he was a private citizen, Bessent indirectly questioned how Trump would conduct himself if the Fed didn’t act according to expectation.
“So far, the attacks have mostly been limited to 280 characters,” Bessent wrote in The International Economy in 2019, referring to the former limit on Twitter posts. “But if this is what happens with 3% [gross domestic product] growth and the unemployment rate at 4%, how will the administration, Congress and the public react to a more serious asset market correction or a meaningful economic downturn?”
Just as Trump picks his moments to scold public officials, Powell, too, picks his battles. There are areas where the Fed has given ground to Trump without pushback. The central bank withdrew from the Network for Greening the Financial System before Trump even took office. Similarly, the Fed’s vice chair for supervision, Michael Barr, indicated this month that he would step down Feb. 28 rather than risk being removed from his role by the then-incoming president.
As for Trump’s diversity, equity and inclusion concerns, the Fed removed references to those programs from its webpage last week, according to Bloomberg Law.
“In the poker game he might be playing with Donald Trump, there are places where Jay Powell is willing to fold, and there are places where he is not,” Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania’s Wharton School of Business, told The Wall Street Journal. “Subordinating the FOMC to the whims of a sitting president is not something Jay Powell will do.”
While Powell on Wednesday did not comment on some of the things Trump said at Davos, he did touch on de-banking allegations – particularly concerning cryptocurrency holders.
"We're not against innovation," Powell said Wednesday, according to American Banker. "And we certainly don't want to take actions that would cause banks to … terminate customers who are perfectly legal just because of excess risk aversion, maybe related to regulation and supervision."
Powell said it would be “helpful if there were a greater regulatory apparatus around crypto."
Since Trump took office, the Securities and Exchange Commission, for one, launched a crypto task force with the aim to develop a clear regulatory framework for the sector.
In the meantime, banks are "perfectly able" to serve crypto customers in ways that comply with anti-money laundering and Bank Secrecy Act guidelines, Powell said Wednesday.
