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Donald Trump has made it clear that he will only consider appointing a new Federal Reserve chair who is willing to cut US interest rates. In a recent statement, the president called on the central bank to slash borrowing costs to 1 per cent, emphasizing his desire for a more accommodative monetary policy.
Trump’s criticism of the current chair, Jay Powell, has been relentless. Describing Powell as a “stubborn mule,” Trump expressed his wish for him to resign, stating that he would prefer someone who is more aligned with his views on interest rates. Powell, however, has reiterated his commitment to serving his full term, which ends in May 2026.
The president’s remarks reflect his ongoing dissatisfaction with the Fed’s decision to maintain interest rates at 4.25-4.5 per cent this year, halting the cutting cycle that began in 2024. Trump believes that rates should currently be at 1 per cent and has instructed his administration to limit long-term debt issuance until a new Fed chair is appointed.
While Trump has mentioned having a shortlist of potential candidates to lead the Fed, the White House has clarified that no decision is imminent. Speculation is rife that Trump may choose a “shadow Fed chair” who shares his views on rate cuts. Candidates such as Christopher Waller, Kevin Hassett, and Scott Bessent have all expressed support for lowering borrowing costs.
However, experts caution that the idea of a shadow Fed chair may not be as effective as Trump hopes. The Federal Reserve operates as a collective body, with the chair working alongside other members of the Federal Open Market Committee to set interest rates. Attempting to exert undue influence over the committee could backfire and weaken the new chair’s authority.
Raghuram Rajan, a University of Chicago academic and former head of the Reserve Bank of India, emphasized the Fed’s unique structure, which includes a central board and regional banks. This decentralized system helps insulate rate-setters from political pressure and ensures that decisions are made based on economic data rather than political considerations.
As the debate over the Federal Reserve chair continues, it remains to be seen how Trump’s efforts to influence monetary policy will play out. The independence of the Fed and its commitment to data-driven decision-making will likely remain steadfast, regardless of political rhetoric.
Additional reporting by Kate Duguid in New York.
