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August 1, 2025 | Powell Rebukes Trump by Delaying a Rate Cut

Hilliard MacBeth

Author of "When the Bubble Bursts: Surviving the Canadian Real Estate Crash"

Powell Holds the Line as Trump Turns Up the Heat

Fed Chair Jerome Powell held interest rates steady again — a direct rebuke to President Donald Trump, who has been publicly and persistently demanding deep rate cuts.

Trump wants a 300-basis-point cut — a dramatic move that would drive rates back to 1.5%, where they sat after the 2009 crisis. But with inflation rising and markets at record highs, slashing rates now would be like pouring gasoline on a speculative fire.

Powell isn’t budging.

Nor is he backing down from Trump’s escalating pressure. The president has floated the idea of firing Powell — whose term runs until May 2026 — but legal experts say the Fed chair can’t be removed without cause. Powell, for his part, has vowed to stay put, citing the critical importance of the Fed’s independence from political interference.

That independence is being tested like never before.

Trump has made things personal, calling Powell a “numbskull,” “fool,” and “major loser.” He even showed up at the Federal Reserve last week — ostensibly to review progress on a $2.5 billion renovation of its historic buildings — and ended up in a shouting match with Powell over the cost. Trump called the project a “fraud.”

At the latest Fed meeting, two Trump-appointed members dissented, voting to cut rates. They were overruled, but their presence underscores the pressure campaign underway.

This isn’t the first time American politicians have tried to bend central bankers to their will. Over 200 years ago, Alexander Hamilton launched the First Bank of the United States, a privately owned institution designed to keep political hands off the credit spigot. The idea: if your own money is at stake, you’ll resist calls to recklessly finance government spending.

The modern Fed — founded in 1913 — has drifted far from that Hamiltonian ideal. Today it plays lender of last resort in every crisis. Meanwhile, Congress can run trillion-dollar deficits to juice the economy without Fed help.

So why the pressure on Powell?

Because Trump wants it all — stimulus, low rates, and someone to blame if the market cracks. But caving to political demands would damage the Fed’s credibility far more than any temporary market wobble.

There may come a time when cutting rates makes economic sense. But that decision should be based on inflation and employment data — not the whims of whoever sits in the Oval Office.

The Fed meets again in September. Between now and then, we’ll see two more inflation estimates and two monthly employment reports. Those numbers may justify a rate cut. But if Powell folds under Trump’s bullying, the Fed’s independence — hard-won over two centuries — may prove to be a historical illusion.

For now, Powell is standing firm. Let’s hope he stays the course.

Hilliard MacBeth

The opinions expressed in this report are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson Wealth or its affiliates. Assumptions, opinions and estimates constitute the author’s judgment as of the date of this material and are subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Past performance is not indicative of future results. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances.. Richardson Wealth is a member of Canadian Investor Protection Fund. Richardson Wealth is a trademark by its respective owners used under license by Richardson Wealth.

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August 1st, 2025

Posted In: Hilliard's Weekend Notebook

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