


As the strain between President Donald Trump and Federal Reserve Chairman Jerome Powell continues to play out — including in public — the Fed is likely to leave its short-term interest rate unchanged on Wednesday, which would mark the fifth straight meeting in which Powell has refused Trump's urging to lower the rate.
Meanwhile, White House Budget Director Russell Vought is openly questioning Powell's honesty.
In other words, it's business as usual between Trump's White House and Powell's Federal Reserve, with Trump continuing to pressure Powell to lower short-term rates, which would likely be a boon for the economy, and Powell cautiously holding firm, fearing the possibility of rising inflation.
As reported by Fox Business on Tuesday, the Federal Open Market Committee (FOMC), the Fed's monetary policy-setting panel, kicks off a two-day meeting on Tuesday and is expected to announce its interest rate decision on Wednesday, when Powell is expected to hold a press conference.
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The debate between the Trump administration and the Fed comes down to two basic differences:
Trump says that because the U.S. economy is doing well, the Fed should cut rates, as if the U.S. is a blue-chip company that should pay less to borrow than a risky start-up.
Fed officials — and nearly all economists — see it the other way: A solid economy means rates should be relatively high, to prevent overheating and a burst of inflation.
Even if Powell remains unconvinced about lowering rates, two members of the central bank's governing board — both appointed by Trump — could dissent on Wednesday in favor of cutting rates. If so, that would be the first time two governors have voted against the chair since 1993.
Incidentally, the Federal Reserve is an independent agency within the federal government:
The Federal Reserve, like many other central banks, is an independent government agency but also one that is ultimately accountable to the public and the Congress.
The Chair and other staff testify before Congress, and the Board submits an extensive report—the Monetary Policy Report—on recent economic developments and its plans for monetary policy twice a year.
The Board also makes public the System's independently audited financial statements, along with minutes from the FOMC meetings.
In related news, Vought (director of the White House OMB) suggests to Newsmax in an exclusive interview that he questions Powell's honesty. Asked if he and Trump regard the Fed chair as "an honest man," Vought deflected, responding:
I think that's a question that needs to be borne out by the review of the facts and what we find... We heard what he said in committee. We've seen his response to our letter. We're not there yet in terms of his response being the end of the query.
In response to a question about the roughly $3 billion renovation the central bank has undertaken at its headquarters across from the World War II Memorial, Vought was even more specific:
What we have tried to do is to get a handle on the claims that Chairman Powell has made and to assess whether those in fact are true.
While it's widely expected that the Fed will leave its short-term rates unchanged this week, which would likely not please the White House and likely lead to the public disagreement between Trump and Powell continuing, if I were to place a bet on whether of not the Fed rate will be lowered in September — assuming the economy continues to grow and inflation remains under control in the coming weeks — I'd bet yes. As Trump might say, we'll see.
Editor’s Note: Thanks to President Trump’s leadership and bold policies, America’s economy is back on track.
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