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Trump's silhouette as a wrecking ball banging into the Federal Reserve.
Trump’s attacks on the Fed will backfire
President Trump has made no secret of his longstanding desire for lower interest rates to juice the economy and reduce the cost of servicing the $30 trillion federal debt. But his attacks on the Federal Reserve will prove self-defeating, driving up borrowing costs for American consumers, businesses, and the federal government.
For months, the president has threatened and insulted Fed chair Jerome Powell for refusing to cut rates, even toying with the idea of firing him over supposed (and nakedly pretextual) cost overruns on the renovation of the Fed’s headquarters. Yet despite the bluster, he has stopped short of the one move advisers warned him could turn financial markets against him: actually sacking him. Why risk it when Powell’s term as chair expires in May, at which point Trump (who appointed him in 2018) will get to select a replacement more willing to do his bidding?
The president even got an unexpected chance to fill a Federal Reserve Board seat last month when Fed governor Adriana Kugler resigned under suspiciously hasty circumstances before the end of her term, allowing Trump to nominate his economic advisor Stephen Miran to succeed her. You’d think that’d be good enough to keep him placated for a while. Not so.
On Aug. 25, Trump posted a letter to Truth Social announcing he was firing Federal Reserve Board governor Lisa Cook over mortgage fraud allegations from before she joined the Fed. This unprecedented escalation – the first attempt to fire a Fed governor in presidential history – followed a politically motivated investigation started by the Federal Housing Finance Agency’s Bill Pulte, a Trump loyalist and donor who has weaponized his government position to make similar accusations against other MAGA political enemies (California Sen. Adam Schiff and New York Attorney General Letitia James).
Cook, a Biden appointee whose term is set to run until 2038, has refused to resign and is contesting the dismissal. The Supreme Court recently ruled that presidents have wide latitude to fire the heads of independent agencies, but it made a point to carve out an exception for the Fed, whose governors can only be removed “for cause.” What that means exactly, no one knows … because no president has ever tried to fire a Fed governor. Until now.
Although the Department of Justice has launched a criminal investigation into the allegations, Cook hasn’t yet been charged with a crime. It’s unclear whether an allegation of malfeasance that predates Cook’s employment at the Fed and is unrelated to her job meets the judicial bar for “cause” set by the Federal Reserve Act. The matter will be decided by the courts, which granted Cook a preliminary injunction last night, allowing her to stay in the job while the case gets litigated.
Of course, this isn't really about mortgage fraud – it's about seizing control of the Fed. Trump’s not coy about the endgame. On Aug. 26, the president bragged that “We’ll have a majority very shortly, so that’ll be great.” Trump already has two appointees on the Federal Reserve Board, Chris Waller (a favorite to succeed Powell as chair) and Michelle Bowman, and he will likely get a third soon once Miran gets confirmed. If the president ultimately succeeds in pushing out Cook, he’ll have appointed four of the board’s seven members, possibly before Powell even steps down.
That wouldn’t be enough to directly control the 12-person Federal Open Market Committee that sets rates. But a four-person Federal Reserve Board majority would have veto power over the appointment of the regional Fed presidents who sit on the FOMC – and those presidents just so happen to be up for reapproval for five-year terms at the end of February in what's normally a rubber-stamp vote, raising the stakes of both the outcome and the timing of the Cook ruling. Not that the administration needs to actually fire every independent-minded dissenter to chill dissent: sometimes, the demonstration effect of seeing some of your colleagues’ lives ruined is enough to sway behavior.
Yet even if Trump succeeds in stacking the FOMC with loyalists (a big if), the president will still struggle to get what he wants most out of this whole enterprise: substantially lower borrowing costs.
The crux of the issue is that the Fed only has direct control over short-term interest rates, but most borrowers care about long-term rates, which are determined by market expectations of future economic growth, inflation, and fiscal policy. The more the president leans on the Fed, the greater the compensation demanded to hold long-term bonds, as investors lose confidence in the Fed’s ability to keep inflation under control no matter the political costs to the president.
Accordingly, the benefits to Trump of pushing for lower interest rates than merited by economic conditions would likely be offset by large and sustained increases in long-term yields. In the worst-case scenario, Trump forces the Fed to set rates inappropriately low, causing inflation to rise and damaging the Fed’s credibility. By the time the president starts feeling the political pain of runaway prices and orders the Fed to reverse course, the genie is already out of the bottle: inflation expectations are unanchored, long-term rates have spiked, and the Fed is forced to print ever more money to pay for the mounting costs of servicing a growing debt pile. This may sound like the story of an emerging market, but it’s becoming suddenly plausible for the United States.
The last time a US president messed with the Fed’s independence was when Richard Nixon strong-armed Fed chair Arthur Burns into keeping rates low ahead of the 1972 presidential election, causing inflation to spike. It took a decade and punishingly high interest rates to get runaway inflation under control and rebuild the Fed’s credibility, long since understood to be a key pillar of America’s world-beating economy and the dollar’s reserve currency status. Most Wall Street leaders understand the risks of going down the same path again, even if they are too timid to speak out publicly against it (with few exceptions).
So why the muted market reaction? Maybe investors doubt Trump can pull this off. After all, we've been down this road with President Trump before – he's been threatening the Fed since 2017 to little effect. Or maybe investors assume he'll back down in the face of any significant bond market fallout – the so-called TACO trade. But what if that market calm emboldens him to push harder? By the time investors wake up, the damage may be done. As Hemingway wrote about bankruptcy, crises happen gradually, then suddenly.
The real irony? Trump is ramping up his Fed attacks just as he's about to start getting the rate cuts he wants – though not for reasons he'll like. Two weak jobs reports show his tariffs, immigration crackdown, and policy volatility are beginning to weigh on the labor market. The Fed will almost certainly cut rates next week, even if not as aggressively as Trump demands given signs of rising inflation.
If Trump truly wants to lower borrowing costs for Americans, he should stop attacking the Fed and start cutting the deficit. Otherwise, the president will head into the midterms with a slowing economy, soaring prices, and higher long-term rates. Turns out not even the world’s most powerful man can bully bond markets into submission.
Federal Reserve Chairman Jerome Powell attends the Federal Reserve Bank of Kansas City's 2025 Jackson Hole economic symposium, "Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy" in Jackson Hole, Wyoming, U.S., August 21, 2025.
What We’re Watching: Powell signals rate cuts, Sri Lanka’s anti-corruption push, Gaza starvation confirmed
Powell opens door to rate cuts
Federal Reserve Chair Jerome Powell signaled the central bank could cut rates as soon as next month during his annual Jackson Hole address, pointing to a slowing labor market and the risk that tariffs could push prices higher. While jobs remain stable, Powell noted that both hiring and labor demand are weakening. Markets jumped on the signal of easing, a win for President Donald Trump, who has been pressing the Fed to cut rates. But as Powell spoke, Trump renewed threats to fire Fed board member Lisa Cook, potentially allowing him to appoint a more sympathetic replacement — though he would face legal hurdles to do so.
Sri Lanka’s anti-corruption push nabs former president
Sri Lanka’s former president Ranil Wickremesinghe, who led the country from 2022 to 2024, was arrested Friday on corruption charges tied to oversees trips while in office. Wickremesinghe came to power following mass protests over the island’s worst-ever economic crisis, and was credited with stabilizing the economy and securing an IMF bailout. That bailout came with harsh austerity, however, fueling public anger and paving the way for his defeat last year to leftist reformer Anura Kumara Dissanayake, who campaigned on rooting out corruption. Wickremesinghe’s arrest is the most high-profile yet in a post-crisis anti-graft drive that has already ensnared 63 Sri Lankan officials and politicians.
Parts of Gaza suffering from starvation, food insecurity group finds
Half a million people in Gaza City and its surrounding areas are suffering from famine, the Integrated Food Security Phase Classification (IPC) concluded. Most other parts of Gaza are experiencing severe hunger, said the food monitor. Whether Gazans have been suffering from starvation has been the subject of much debate – the IPC last year refuted a USAID report that had argued there was famine. Recent images from Gaza, as well the IPC’s reversal, tell their own story. Israeli Prime Minister Benjamin Netanyahu denies that there is starvation, and is pressing forward with plans to conquer Gaza City.Venezuelan President Nicolas Maduro addresses supporters during a march marking the first anniversary of his victory in the disputed July 28 presidential election, in Caracas, Venezuela July 28, 2025.
Hard Numbers: US doubles Maduro’s bounty, Trump appoints new Fed member, Modi and Lula combine forces, & more
$50 million: The US doubled its bounty to $50 million for Venezuelan President Nicolás Maduro’s arrest. The reward is linked to a 2020 case at the US Department of Justice that accused Maduro and other Venezuelan officials of narco-terrorism, corruption, and drug trafficking. Venezuela has dismissed the move as “political propaganda.”
7: US President Donald Trump will nominate Stephen Miran, a tariff advocate and critic of current Fed chair Jay Powell, to temporarily join the seven-member Federal Reserve board, a move analysts say could be positioning Miran to take over for Powell once his term is up in February of 2026. Miran is known for supporting the goal of structurally weakening the US dollar – more on that here.
50: Indian Prime Minister Narendra Modi and Brazilian President Luiz Inácio Lula da Silva hopped on a call to discuss a unified response to Trump’s tariffs, which currently stand at 50% against Brazil and 25% against India. The call comes the day after Lula announced he would try to rally BRICS countries to push back on the US leader’s trade policy.
8: Check m8. OpenAI’s model beat Elon Musk’s Grok, and Google’s Gemini model came after a three day chess tournament this week. The competition took place between eight AI companies' normal AI products – rather than models designed for chess – testing their reasoning skills at a task they are still improving at.U.S. President Donald Trump speaks next to Federal Reserve Chair Jerome Powell during a tour of the Federal Reserve Board building, which is currently undergoing renovations, in Washington, D.C., U.S., July 24, 2025.
Why is Trump threatening the Fed, and why does it matter?
On Thursday afternoon, just before golden hour, President Donald Trump threw a white hardhat over his flaxen coif and strode into the Federal Reserve building on Constitution Avenue.
The stated purpose of his visit to the world’s most influential central bank was almost comically mundane: he was there to inspect a building renovation project for cost overruns. Trump is, as he likes to remind people, a “builder,” so he knows an overpriced crown molding when he sees one. He says the $2.5-billion project, funded by Congress, is already more than $500 million over budget. The Fed disputes this number.
Sure enough, after a walking tour of the sites with Fed Chairman Jerome Powell, the two men sparred about the costs of the buildings that are currently being rebuilt by the Fed – and at least one that is not being built because, as Powell gamely pointed out, it was already built five years ago.
But the hardhat haggling was pantomime for a more serious dispute.
For weeks now, Trump has been insulting and pressuring the “numbskull” Powell to lower interest rates, in hopes that doing so will give the US economy, “the hottest in the world,” a boost. The midterms are, after all, approaching.
But Powell isn’t budging. He argues that with Trump’s tariff threats still nudging up prices, lower rates could set inflation soaring all over again. The Fed’s legally-mandated job is to keep inflation low and growth humming – without presidential meddling.
More alarmingly, Trump has recently pondered removing Powell – whom he nominated as Fed chair eight years ago – before his term ends next spring. Doing so would be an unprecedented assault on the Fed’s independence. Under the law, a president can sack a Fed chair only for serious violations of the law or ethics.
Disagreements over interest rate policy are not that. But an allegedly botched building renovation that has cost taxpayers hundreds of millions of dollars in cost overruns? Maybe it’s malfeasance enough. And while Trump said yesterday that firing Powell because of cost overruns would be a “a big move” that is “not necessary” right now, the visit sends a clear message: this is an issue that can be brought up again if Powell doesn’t, as Trump insists, “do the right thing.”
So what is “Fed independence”? And why is it a problem if it suffers?
To learn more I rang up one of the smartest global economy analysts out there – Rob Kahn, Managing Director of Global Macro at Eurasia Group. Our exchange has been edited for clarity and concision. Here goes.
Rob, why is central bank independence so important, and to whom?
When a central bank is subservient to the government, it will often make decisions to keep interest rates too low. And as a result you get too much money printed up and then more inflation.
There is a vast body of evidence that says that economies that have independent central banks do better. They tend to have lower inflation and higher growth. When everyone – financial markets, firms, households – can make longer-term investment and spending decisions based on stable accurate expectations about what the future will hold, they make better decisions and they have better outcomes.
Economies just perform better when individuals have reasonably stable expectations about what inflation's going to be this year, next year, five years from now.
If Trump forces Powell to cut rates, or replaces him with someone who does that, what might happen?
The first thing to remind people of is that the Fed doesn’t actually control all the interest rates in the economy. They control the so-called “federal funds rate,” which is the rate at which banks lend to each other. By doing that, they can influence all the other interest rates in the economy, but they don’t control them directly.
If the Fed were perceived to be cutting rates under pressure from Donald Trump, you might see that even though the Fed funds rate went down, other lenders would say, “Wow, in the longer term we’re going to have higher inflation, so we’re going to actually need higher interest rates ahead of that.” So even though the Fed rate goes down, the market rates for a lot of people could actually go up.
Why is Trump’s hardhat visit so alarming for people worried about Fed independence?
Well, if they can fire the Fed chair for overspending on a building project, then you know that any time a president has a disagreement with the Fed chair in the future, he can just come up with something and say, “oh, this is the real cause,” and fire him for that.
And that will effectively undermine the Fed’s independence. So Trump in a hard hat is really not about a renovation. This is really about whether the Fed can be independent in setting monetary policy. Don’t be fooled.
U.S. Federal Reserve Chair Jerome Powell attends a press conference following the issuance of the Federal Open Market Committee's statement on interest rate policy in Washington, D.C., U.S., June 18, 2025
Hard Numbers: Fed holds interest rates, Canada’s population stays flat, LNG plant to open in B.C., US nabs suspects in “largest jewelry heist”
4: The US Fed on Wednesday held interest rates steady for the fourth time in a row, awaiting more data on the economic impact of Donald Trump’s tariff policies. Trump himself this week blasted Fed Chair Jerome Powell as “a stupid person, frankly” for not resuming the rate cuts that began last fall.
0%: Canada recorded a population growth of 0% in the first quarter of 2025, the lowest mark since 2020. This is the sixth consecutive quarter where population growth has slowed, and it comes after the federal government voted to reduce immigration levels late last year.
14 million: Canada is set to produce liquified natural gas (LNG) for the first time this weekend when a coastal facility in British Columbia begins operating. While the nearly $30-billion plant will initially operate at just one quarter of its capacity, it is expected to ultimately export 14 million metric tonnes of LNG every year. It is the first North American LNG plant with direct access to the Pacific, meaning it can serve the voracious appetite for LNG in Asia.
$100 million: Seven men were arrested in California for the “largest jewelry heist” in US history, after stealing $100 million dollars worth of gold, gems, and watches from an armored truck near San Francisco in 2022.
Traders work as screens broadcast a news conference by US Federal Reserve Chair Jerome Powell following the Fed rate announcement, on the floor of the New York Stock Exchange (NYSE) in New York City, USA, on May 7, 2025.
Hard Numbers: Federal Reserve holds interest rates steady, US Navy jets skid into the sea, The one-percent impact on the climate, Feathery “mass cannibalism” in South Africa
4.5: The US Federal Reserve on Wednesday left its key interest rate unchanged for the third time in a row, keeping it at 4.25%-4.5%, where it’s been since December. President Donald Trump has publicly pressured Federal Reserve Chair Jerome Powell to lower rates. “The economy itself is still in solid shape,” Powell told reporters Wednesday, but he said a “great deal of uncertainty” remains about the impact of Trump’s global tariffs and wider trade wars.
2: Speaking of uncertainty, why are US warplanes falling into the sea? According to reports, two F/A-18 Super Hornet fighter jets have slid off the deck of the USS Harry S. Truman carrier into the Red Sea over the past week alone. The first plunged into the water when the warship made a hard turn to evade fire from Houthi rebels. The second may have experienced a landing problem. Each jet costs a cool $60 million – cue Commander Stinger, “you don’t own that plane, the taxpayers do!”
10: The richest 10% of the global population are responsible for two-thirds of the global temperature rise since 1990, according to new research published by Nature Climate Change. The study also claims that compared to the average person, the world’s richest 1% contributed 26 times more to extreme heat globally and 17 times as much to droughts in the Amazon. Private jets are not, as it happens, great for the environment.
350,000: Animal welfare officers in South Africa euthanized more than 350,000 chickens after a state-owned poultry company ran out of funds to feed them. Officials couldn't estimate how many other chickens had died before this intervention due to “mass cannibalism” at the farm (yes, chickens eating each other). Still, on the plus side, the NSCPA’s action saved more than 500,000 chickens who may now be… eaten by people anyway.US President Donald Trump alongside Federal Reserve Chairman Jerome Powell, back when the latter was the nominee for his current position, in Washington, D.C., USA, on November 2, 2017.
Could the Fed’s independent streak be over?
The United States’ judicial branch is set to reexamine an old decision that could have huge new consequences for the credibility and stability of the world’s largest economy.
The Supreme Court has requested briefs in a case that concerns the so-called “Humphrey’s Executor” precedent, a 90-year-old ruling that stops presidents from firing the leaders of quasi-governmental institutions without cause.
The Trump administration, which wants more power to sack appointees, says the precedent wrongly limits executive authority, and should be reversed.
What this is really about. Though the case concerns members of the National Labor Relations Board and the Merit Systems Protection Board, the Supreme Court’s decision could allow the president to fire a much more important figure: Fed Chairman Jerome Powell. That’s because the Federal Reserve, like the NLRB and MSPB, is also a quasi-governmental organization, meaning that it works for the public interest but is independent of the executive branch.
With Donald Trump’s trade war already putting US financial and bond markets on edge, the last thing the central bank wants is a loss of independence, which would compromise markets’ confidence that the regulator is acting based on its economic mandates rather than Trump’s political whims.
Carveout possible. The top US court is reportedly skeptical of the Humphrey’s Executor precedent, but there is a world where it overturns this 1935 ruling while explicitly safeguarding the Federal Reserve’s independence.
There’ll be a new sheriff. Whatever happens, Powell’s term ends in May 2026, giving Trump the chance to nominate a successor. We’ll be keeping an eye on whether Treasury Secretary Scott Bessent, who has emerged as a leading voice in the White House, starts interviewing potential candidates sooner than that...Flags of Canada and China.
HARD NUMBERS: China executes Canadians, Tariffs slow economic growth, Canada buys Australian tech, Fed keeps rates steady, Egg seizures escalate while drug busts drop
4: The Canadian government has strongly condemned China’s use of the death penalty, following revelations the country executed four Canadian citizens for drug-related offenses, despite appeals for clemency. China carries out more executions than any other country and has a conviction rate of over 99%.
2.2: US President Donald Trump's tariff tiff with Canada is dampening economic growth on both sides of the border. Canada’s GDP was set to rise by 2% in 2025, and America’s by 2.4%. An OECD analysis has revised those figures to 0.7% and 2.2%, respectively, as a result of the trade war.
6 billion: Canadian Prime Minister Mark Carney announced a CA$6 billion purchase of an Over-the-Horizon Radar system from Australia to enhance Arctic early warning capabilities. Carney’s move both asserted Canada’s northern sovereignty and allowed Australia to find a buyer for its technology after DOGE cuts impacted possible US spending on the project.
4.5: The US Federal Reserve held overnight interest rates steady on Wednesday, in the target range of 4.25 to 4.5 %. But the Fed also signaled a willingness to cut borrowing costs by half a percentage point later this year, anticipating economic growth to slow to 1.7% and inflation to rise to 2.7%.
116: US Customs and Border Protection says it made 3,254 egg-related seizures in January and February 2025, a 116% increase compared to the same period one year ago. US egg prices have ballooned 59% since February 2024 because of the culling of flocks due to bird flu. In comparison, fentanyl seizures at the border dropped by 32% during the same period compared to the previous year.