Federal Reserve Chairman Jerome Powell stood in Dallas and confidently — or perhaps delusionally — declared that there was no rush to cut interest rates.
“The economy is not sending any signals that we need to hurry up,” Powell said at a Dallas Fed event on Nov. 14. Is that true? Inflation remains above the Fed’s 2% target. Rent inflation remains stuck, stubborn as ever, and the Cleveland Fed says it may not cool down until 2026. But Powell thinks he has all the time in the world to figure it out.
He’s not wrong that the economy has strengths. Unemployment at 4.1%? Great. Growth heading toward 2.5% a year? Not bad. Consumer spending is strong, and businesses are still putting money into investments.
Inflation Doesn't Wait, But Powell Does
Powell even called the situation “remarkably good.” But there’s a problem: Inflation is eating into it. Prices are high, rents are through the roof, and wages aren’t keeping up. Still, Powell seems okay with taking a slow, cautious approach, even if it means prolonging this mess longer than anyone can afford.
Shelter costs accounted for more than half of the October CPI increase. This is not a small problem. It’s a crisis. Fewer people are moving or signing new leases, which means the CPI isn’t capturing the full picture.
Powell’s response? Wait. He argues that the current strength of the economy gives him room to “carefully approach our decisions.” Translation: Do nothing now.
“Signs of higher inflation, even if the data is lagging like rent, make communication more difficult, which could ultimately make it harder to cut rates,” said Umair Sharif, who heads Inflation Insights LLC.
Fed Governor Michelle Bowman voted explicitly against cutting interest rates in September because she wanted a smaller cut. She’s not alone in her frustration. Several other officials share her frustration.
Trump vs. Powell: Round Two
Just when you thought Powell’s job couldn’t get any more complicated, Donald Trump is back for another round. And just two days after Trump was declared president, tensions between him and Powell are already high.
At a news conference following the Fed’s latest policy meeting, Powell was asked whether he would step down if Trump asked him to. His answer? A blunt “No.”
Another reporter pressed him on whether Dent could fire or demote a Fed chairman. Powell’s response was equally blunt: “It’s not allowed under the law.” He paused after each word for emphasis, as if challenging Trump to test him.
If history is any guide, Trump is likely to do just that. During his first term, he repeatedly criticized Powell for not cutting interest rates faster. At one point in 2020, Trump told reporters he had the “right to fire” Powell, calling his decisions “bad.”
Trump has also said explicitly that he believes the dent should have a say in interest rate decisions. “I feel like the dent should at least have a say in this,” he said in August, boasting of his business instincts. “I’ve made a lot of money. I’ve been very successful.”
The idea that the Fed should be involved in its decisions runs counter to its independence, which Congress has mandated. The Fed is not supposed to be accountable to the White House, or anyone else.
But Trump doesn’t care about tradition. If Republicans take over Congress, Trump may find it easier to push the Fed into a corner, especially since six of the nine Supreme Court justices were appointed by Republicans.
Economic growth hides bigger problems
Both Powell and Trump love to tout economic growth, but neither seems interested in addressing the cracks beneath the surface. Powell cites consumer spending and low unemployment as evidence that the economy is thriving.
During his first term, Trump oversaw annual GDP growth of 2.5%, slightly beating Obama’s figures. He also boasted of job creation, with unemployment hitting a 50-year low of 3.5% in early 2020.
But those statistics don’t tell the whole story. Trump’s 2017 tax cuts cut corporate interest rates from 35% to 21%, giving companies a short-term boost. Meanwhile, the Fed’s defi rose from $585 billion in 2016 to $984 billion by 2019.
The national debt has risen by $7.8 trillion under Trump’s watch, a staggering figure that undermines his claims to economic brilliance.
Then came the pandemic. The unemployment rate soared to 14.7% in April 2020, erasing years of progress overnight. Trump’s response included signing the $2.2 trillion CARES Act, which provided relief but also highlighted the fragility of his economic policies. The recovery has been uneven, with low-income families bearing the brunt of the crisis.
Powell isn’t off the hook either. His slow response to inflation and reluctance to act decisively have left millions of Americans struggling to keep up with rising costs. He claims to be playing the long game, but for people living paycheck to paycheck, his strategy offers little comfort.
Trump's Economic Legacy
Trump’s economic record is a mix of bold ideas and glaring flaws. His trade wars with China have disrupted global supply chains and raised costs for American companies. While his renegotiation of the North American Free Trade Agreement (NAFTA) into the USMCA has brought some benefits, it has not addressed deeper structural issues in trade.
Deregulation was another cornerstone of Trump’s presidency. He rolled back more than 100 environmental rules and eased financial regulations, moves that businesses welcomed but critics warned could have long-term consequences.
His push to cut interest rates, often at Powell's expense, showed his preference for short-term market gains over sustainable growth.
Despite these efforts, Trump’s policies have not shielded the economy from the impact of the pandemic. His response has been reactive, focusing on appearances over substance.
Between Powell’s hesitation and Trump’s impetuousness, the U.S. economy is stuck in a precarious equilibrium. Neither seems right for the job right now, that’s for sure.