Donald Trump is maximising the pressure on Federal Reserve chairman Jerome Powell as only he knows how – through the deployment of political showmanship in the full glare of the global media.
Trump, as a real estate mogul, is monstering Powell over the most contentious building upgrade in America – the $US2.5bn ($3.8bn) renovation of the Federal Reserve in Washington – but his true goal is to leverage all the power of his position as President to pressure the Fed into cutting interest rates.
While the market is pricing a near-certain hold on Wednesday next week at 4.25 to 4.5 per cent, there is no doubt a titanic power struggle is playing out between Trump and the Federal Reserve for greater control over the US economy.
The independence of the central bank is under assault, with Trump arguing for a three-percentage-point reduction.
His rare visit on Thursday (Friday AEST) to tour the Fed’s headquarters and the ongoing work at the Marriner S Eccles building in Washington is just the latest escalation in his pressure campaign.
The renovations are Powell’s weak spot and Trump is twisting the knife given the project is $US700m over budget and estimated to cost $US2.5bn.
While the Supreme Court has signalled that Federal Reserve board members have special constitutional protections against removal, Trump is hyping perceptions he could use the cost blowouts on the renovations as the basis for terminating Powell.
Such a move would be extraordinary, but this was the threat behind Trump’s tour of the building. To ram home the point, Trump stopped in front of the cameras and asked for the Fed chair to join him. Powell did so reluctantly.
Trump went on to say the renovations would cost “about $US3.1bn” – a substantial increase on the Fed’s figure of $US2.5bn. He declared that the number had “just came out”.
But Powell made clear he would not be railroaded. Shaking his head vigorously, he sought to check the US President. “I’m not aware of that,” he said. “I haven’t heard that from anybody at the Fed.” The remark prompted Trump to remove a paper from his coat pocket, which he passed to the Fed chair.
Looking at the document, Powell said the larger sum included the work done on the William McChesney Martin building, which he said was finished half a decade ago.
“You just added in a third building,” Powell said.
“It’s part of the overall work,” Trump said.
“It’s not new,” Powell said.
The conversation became no more heated, but the tension was there – the Fed chair was resisting the pressure from the US President.
In case the point was lost on Powell, Trump gave a pointed answer to a question about what he would do as a real estate developer if a project manager was over budget.
“Generally speaking, what would I do? I’d fire ’em,” he said.
Trump has made sport out of threatening Powell’s removal and branded him on social media a “fool”, a “major loser”, a “numbskull”, and “Mr Too Late” for opting to keep rates on hold.
Asked if Powell could say anything that would stop him from continuing his criticisms, Trump replied: “I’d love him to lower interest rates. Other than that, what can I tell you ... We’re going to see how the board rules on that soon.”
Speaking after the tour concluded, Trump said: “We (America) should have the lowest interest rate.
“If you took it down three points … we would save more than a trillion dollars. We had a little talk about it, and I thought it was a very productive talk.
“There was no tension. I believe that he’s going to do the right thing. I believe that the chairman is going to do the right thing.”
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