Here’s Why Trump’s Fed Pressure Campaign May Deliver

Donald Trump has never hidden his frustration with the Federal Reserve — and now, back in the White House, his attacks have only intensified. From insults directed at Chair Jerome Powell to threats against Fed Governor Lisa Cook, the president is waging an extraordinary campaign to push the central bank into cutting interest rates.It’s a striking challenge to central bank independence in the world’s largest economy. But could Trump’s unconventional pressure actually work?

Bloomberg White House correspondent Catherine Lucey joins host Stephen Carroll to break down what’s at stake for the Fed, financial markets, and the future of US economic policy.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. I'm Stephen Carroll, and
this is Here's Why, where we take one news story
and explain it in just a few minutes with our
experts here at Bloomberg.

Speaker 2 (00:19):
The President sent this note to the FED.

Speaker 1 (00:21):
Share It says, Jerome, you are, as usual too late.

Speaker 2 (00:24):
You have cost the USA a fortune and continue to
do so, and the FED oftentimes is perceived to be
a globalist, elitist institution.

Speaker 1 (00:31):
President absolutely has authority to hire a FED governor for cause,
and I think the accusations are serious.

Speaker 2 (00:38):
The President's concerned about the building and those massive costs overrun,
which just tell you that there is no accountability at
that organization.

Speaker 1 (00:46):
Maybe I should go to the FED. Am I allowed
to appoint myself?

Speaker 2 (00:49):
Doug?

Speaker 1 (00:50):
I don't know. Am I allowed to appoint myself at
the FED? I do a much better job than these people.
Donald Trump and his allies have plenty to say about
the Federal Reserve. Not much of it is good. The
US President has been clear that his goal is to
get the Central Bank to lower interest rates, but his
method has involved unprecedented attacks on the FED, insulting charge

(01:12):
your own Powell, criticizing a renovation project at its headquarters
and moving to fire FED Governor Lisa Cook. It's a
striking challenge to central bank independence and a developed economy.
But will it work? Here's why Trump's FED pressure campaign
may deliver. Our White House correspondent Katherine Lucy joins me.

(01:36):
Now for more, Catherine, can you put these actions in
context for US? Has a president ever done more to
try to influence the FED.

Speaker 2 (01:45):
Presidents have had conflicts with FED chairs before, Presidents have
privately put pressure on the FED. Richard Nixon certainly pushed
the FED to keep interest rates low when he was president,
But no president has has ever tried to fire a
member of the FED board before, and so this is

(02:05):
a notable escalation and it really strikes at the heart
of the independence of the central Bank.

Speaker 1 (02:13):
You've been writing recently about the President's Summer of revenge.
Is he using a similar strategy against others that he opposes.

Speaker 2 (02:21):
You've seen a lot of moves from the President in
recent months to try and take actions against people he
perceives as enemies or as opposing his political agenda. So
we've seen things like stripping people of security clearances, investigations
into people, threats, on social media and also firing or

(02:41):
attempting to fire people from agencies that tend to operate independently.
So in addition to this move to try to fire
Lisa Cook on the FED board, which obviously she is
fighting in court, recently saw an FBI raid on Trump's
former National Secure the Advisor John Bolton, who has been

(03:02):
a high profile critic the administration. Officials have said there
are legitimate concerns about his handling a classified material, but
certainly this was perceived by some as an escalation the
other there moves against other top officials. The White House
fired the Centers for Disease Control and Prevention director just
weeks into her tenure, and he's made threats against any

(03:24):
number of people who he sees as criticizing him, like
Chris Christi, the former New Jersey governor who used to
be a supporter, for example. So he has made any
number of moves in recent weeks and months that I
think a lot of people see, as you know, ways
to silence or pressure people that the White House sees

(03:45):
as not being in line with Trump's plans and his agenda.
And he to remember, he ran a campaign saying I
will be your retribution was a line that he used
on the campaign trail a lot. Certainly, Trump and his
supporters feel that he has been subjected to unfair investigations

(04:07):
and prosecutions, and so some of the systems from that
as well.

Speaker 1 (04:12):
Is this kind of multi pronged campaign delivering results for
the president.

Speaker 2 (04:17):
Some of these moves are being countered in court. In
terms of Lisa Cook, We'll have to see what happens
with her efforts to stay on the Fed board. But
some people have been removed from their jobs. Certainly, some
people have lost security clearances or One thing the president
has done is ended Secret Service protection for the former
Vice president Kamala Harris. You know, typically that does end

(04:38):
at the six month mark, but she had been given
an extension on that protection. So some of these moves
are sticking, I think. I think also the concern you
hear from a lot from people who are watching this
is does this also just have a chilling effect on
critics or opponents of the president. Does this send a
message about how things are being run?

Speaker 1 (04:59):
Is there any sign that the Federal Reserve is bending
to the President's pressure.

Speaker 2 (05:04):
Lisa Cook is fighting this in court. They were in
court this week her lawyer is saying there is no
grounds to fire her. They're trying to get an emergency
ruling to keep her in her job. So they are
pushing back very hard and certainly fedher. Jerome Powell, who
Trump has excoriated repeatedly publicly on social media in his

(05:25):
comments pushing him to cut interest rates, certainly he has
not been responsive to Trump's threats. He has recently opened
the door to a potential interest rate cut in September,
but that's based on economic indicators like the labor market.
So so far we have not seen a reaction from
some of the people that Trump is pushing, But there's

(05:48):
also no signs that he's going to stop his campaign.

Speaker 1 (05:51):
What could the President do next in his campaign against
the Federal Reserve.

Speaker 2 (05:55):
Well, I think one key front is obviously how this
is going to play out in court. Both sides are
going to fight. You know, He is going to continue
to push that they had cause to fire Cook, and
this obviously could go to the Supreme Court ultimately, which
will test that theory. Trump has not let up on
his pressure on Jerome Powell in any way, and I

(06:17):
think that will continue, and I think you'll see that
the president does respond very strongly to market indicators. So
if he feels in the fall or in the coming
months that the economy is not going the way that
you want, you could see him escalate his anger about
rate cuts even more aggressively.

Speaker 1 (06:38):
Is there anything to be learned from this exchange between
Donald Trump and the Federal Reserve in terms of a
playbook for others who might find themselves the subject of
attacks by Donald Trump of a way to respond. Is
it a good model for how to resist pressure from
the president?

Speaker 2 (06:56):
What we've seen so far in Trump's presidency is that
the place where he is most likely to be checked
is in court. He doesn't mean that he has always checked.
Some things that he has done have been upheld by
the court. It's been a mixed bag, but there's been
very little pushback on from Republicans on Capitol Hill or

(07:16):
in other parts of government, and so fighting his moves
in the court system so far seems to be people's
best strategy.

Speaker 1 (07:25):
Catherine Lucy, our White House correspondent. Thank you for more
explanations like this from our team of three thousand journalists
and analysts around the world. Go to Bloomberg dot com
slash Explainers I'm Stephen Caroll. This is here's why. I'll
be back next week with more. Thanks for listening.