Former US President Donald Trump once again made headlines with his surprise visit to the Federal Reserve (Fed) building in Washington late last night. During the visit, Trump met with Fed Chair Jerome Powell, sharply criticizing not only the renovation costs of the historic building but also the Fed's monetary policy. He gave Powell a clear message, particularly regarding the need to lower interest rates: "Lower interest rates!"
Billion-Dollar Renovation Debate
The visit coincided with the alleged renovation of the Fed building, reportedly exceeding $3.1 billion, being a hot topic. Trump called these expenses "unnecessarily inflated," while Powell stated that the figure was inaccurate and included another federal building. This frank exchange between the two took place in front of the press and escalated into a heated exchange when Trump declared, "I renovated a larger building for much less." Trump cited the "Old Post Office" as an example, accusing the Fed of waste.
Main Agenda: Interest Rates
However, Trump's main concern wasn't construction, but monetary policy. Amidst the renovation debate, he directly addressed the Fed Chair, saying, "Let's get this done, but more importantly, let's lower interest rates!" As the 2025 elections approach, Trump appears to be putting increasing pressure on Powell. According to Trump, the current interest rates of around 4.33% are too high and are hindering economic growth.
Trump, particularly emphasizing the 1% interest rate target, argued that Powell was late, saying, "Everyone knows what the right thing is." It's reported that some advisors from Trump's team frequently echoed this rhetoric behind the scenes. Following his visit to the Fed, Trump also reported developments on Truth Social.
Powell resists: Emphasis on Fed independence
Despite all this pressure, Jerome Powell refuses to allow any steps that would undermine the Fed's independence. While Trump doesn't appear to directly threaten this, he hints at the possibility of dismissing Powell by using the renovation costs as "legal grounds." However, removing a Fed Chair from office is not easy from a constitutional and legal perspective. Past US Supreme Court decisions demonstrate that the Fed must be insulated from political pressures.
Economic and Political Risks
Experts, however, note that Trump's push for interest rate cuts poses serious economic risks. With inflation still struggling to be brought under control, an aggressive interest rate cut could increase borrowing costs rather than lower them, potentially causing further economic volatility.
Trump's emphasis on public debt is also noteworthy. He argues that interest rate cuts are necessary to reduce interest payments, which will exceed $1.1 trillion by 2024. However, Powell believes that maintaining interest rates at this level is more appropriate given current economic data.
Lowering interest rates generally increases interest in risky assets, creating a positive environment for Bitcoin and other cryptocurrencies. Lower interest rates can lead investors to shift away from traditional financial instruments (e.g., bonds) and toward assets offering higher returns. At the same time, lower borrowing costs facilitate institutional investors' entry into the crypto market. Therefore, the Fed's decision to cut interest rates could be a bullish catalyst for many cryptocurrencies, especially Bitcoin.
For now, Powell isn't backing down. Interest rates are expected to remain steady at the FOMC meeting in July. However, if economic indicators continue to trend positive in the fall, market expectations for a rate cut could strengthen further.
