Donald Trump, Fed chief Jerome Powell bicker during tense central bank visit

A rare visit by a US President to the Federal Reserve in Washington became a made-for-TV moment as Donald Trump and Fed Chair Jerome Powell argued over the $US2.5bn cost of the central bank’s renovation plagued by cost overruns.

Donning white hard hats for their tour of the Federal Reserve’s construction site, President Donald Trump and Fed Chair Jerome Powell almost immediately began squabbling over the cost of the central bank’s building renovations.

When Powell disputed Trump’s claim that the $US2.5 billion price tag had swelled to $US3.1 billion, Trump pulled a piece of paper from his suit jacket, handing it to Powell. The Fed chair put on his glasses and studied it before correcting the president. “You just added a third building, sir,” Powell said, referring to an adjacent office building the Fed finished refurbishing in 2021.

It is hardly their biggest disagreement. The awkward exchange continued with Trump playfully smacking Powell on the back while saying, “I’d love for him to lower interest rates.” For Trump, the extraordinary moment served as political theater designed to amplify pressure on the central bank - part of an unconventional campaign to tarnish Powell’s public image and push for lower interest rates.

There were tense scenes as Donald Trump stood with Federal Reserve Chair Jerome Powell at the $2.5 billion headquarters renovation project.

The building project has become Trump’s latest tool for chiseling away at the Fed for resisting White House pressure to cut interest rates aggressively. Trump has argued in recent weeks for lower interest rates to reduce government borrowing costs.

Later, Trump said he had privately pressed his case. “We had a little talk about it,” Trump said. “I believe the chairman is going to do the right thing.” Powell has said the Fed could cut rates later this year if it looks like any price increases that result from large tariff increases don’t stoke higher inflation. Officials are set to hold rates steady at their policy meeting next week.

The rare presidential visit to the Fed represents the kind of showmanship that has defined Trump’s approach to governing. For a president who built his brand on glitzy real-estate projects and reality television, the tour offers a made-for-TV moment to cast Powell -- Trump’s own pick to lead the central bank eight years ago -- as an incompetent bureaucrat presiding over a $US2.5 billion renovation plagued by cost overruns.

The focus on construction challenges also serves another political purpose: It allows Trump to play offense on an issue that resonates with his base’s antiestablishment sentiment while deflecting attention from other controversies, including criticism over his administration’s handling of documents in the case of disgraced financier and convicted sex-offender Jeffrey Epstein, said Brian Gardner, a Washington policy strategist at Stifel.

Trump and several advisers have said they hope Powell will resign and, separately, that the Fed will cut interest rates at next week’s meeting. Even though neither are likely, attacking the Fed “is just generally good politics for Trump. He was elected to drain the swamp. The Fed, by a large portion of the Republican base, is seen as the swamp,” said Gardner.

The building-project criticism reflects a broader litany of grievances against Powell. Trump allies remain bitter over the Fed’s half-point rate cut in September, which they viewed as inappropriately timed before the November election. Some resent Powell’s demonstration of independence as unjustified defiance of the president’s executive prerogatives.

The front facade of the Marriner S. Eccles Federal Reserve Board Building in Washington.

Their logic isn’t necessarily consistent. Some Trump allies demanding rate cuts now were critical of the Fed cutting rates last September, when rates were higher and inflation roughly the same.

The Fed’s building project isn’t new. But the renovations have gained renewed attention after White House officials this month suggested that Powell either misled Congress or failed to properly manage design changes with a local oversight commission.

Trump was set to be joined on the tour by White House budget director Russell Vought; Bill Pulte, a federal housing regulator; James Blair, a White House deputy chief of staff; and Sen. Tim Scott (R., S.C.), the chair of the Senate Banking Committee. The central bank was notified of Trump’s plan to visit around the time the White House announced it to the public on Wednesday night, according to a person familiar with the matter.

The Fed says the project has faced cost overruns in part because of unforeseen construction conditions such as more asbestos than anticipated, toxic contamination in the soil and a higher-than-expected water table.

Last week, Trump indicated that the renovation might provide grounds to take the unprecedented and legally questionable step of firing Powell. “I think it sort of is,” Trump said. The next day, Trump said he was unlikely to attempt to remove Powell “unless he has to leave for fraud.” Powell’s term as Fed chair expires next May. The Supreme Court recently hinted Trump could remove Fed officials only “for cause” -- wrongdoing that goes beyond a simple policy dispute.

In television interviews this week, Treasury Secretary Scott Bessent has said Trump isn’t planning to oust Powell. “He’s not going to fire him,” Bessent said Wednesday morning on MSNBC. The day before that, Bessent told Fox Business, “There’s nothing that tells me that [Powell] should step down right now. He’s been a good public servant.” Other advisers have called on Powell to resign or be dismissed. The Fed chair “has got to go,” Commerce Secretary Howard Lutnick told Fox on Wednesday night.

But establishment Republicans view such attacks on the central bank’s traditional independence more warily. They worry that undermining confidence in the Fed’s inflation-fighting credibility could weaken the dollar and push up long-term interest rates, which the Fed doesn’t control.

“It’s a very dangerous thing,” said former Sen. Pat Toomey, who was the top Republican on the Senate Banking Committee from 2021 to 2023. While Toomey has been critical of Powell in the past, he thinks the Fed has no good reason to lower rates as Trump is demanding.

The president’s desire to reduce rates aggressively right now “significantly increases the risk that inflation kicks up and accelerates, so I don’t think what [Trump] wants makes sense, even from his own political point of view,” said Toomey.

The building controversy “is literally a sideshow,” said Douglas Holtz-Eakin, who has been an economic adviser to Republican presidential campaigns. The key question is whether the Fed has judged the near-term outlook correctly and managed interest-rate policy appropriately, he said.

The Fed faces a series of judgments that have been made more difficult by Trump’s tariff policies, which threaten to send up prices while slowing economic activity. In such a scenario, the Fed is like a soccer goalie who has to decide whether to dive to the left to shore up faltering growth or dive to the right to corral inflation.

“As you watch the spectacle of administration officials parading through the construction site this week, remind yourself that the Fed is a serious institution, engaged in serious (not to be confused with error-free) policymaking on behalf of the American people,” Holtz-Eakin said.

The Wall Street Journal