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Donald Trump told the head of the Federal Reserve that he was making a “mistake” by not loosening US monetary policy, in their first meeting of Trump’s second term.
Fed chair Jay Powell had been invited by the president to the White House on Thursday to discuss, according to the US central bank, “economic developments including for growth, employment, and inflation”.
The talks follow pressure from the president on the Fed chair to lower interest rates in order to blunt the impact of the administration’s trade policies.
Following the private meeting, White House press secretary Karoline Leavitt said Trump told Powell he believed the Fed chair was “making a mistake by not lowering interest rates, which is putting us at an economic disadvantage to China and other countries”.
According to the Fed, Powell “did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming economic information and what that means for the outlook”.
The central bank said in a statement following Thursday’s meeting that Powell told Trump that the chair and his colleagues on the Fed’s interest rate-setting committee “will set monetary policy, as required by law, to support maximum employment and stable prices and will make those decisions based solely on careful, objective, and non-political analysis”.
Trump has in the past considered removing Powell from his post before his term ends in May 2026 — a possibility that has unnerved markets by calling into question the Fed’s independence.
But the president last month said he had “no intention of firing [Powell]” in comments that soothed investors. The Fed has kept its main interest rate steady with a target range between 4.25 per cent and 4.5 per cent since Trump took office for a second time in January.
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Following an escalation in the Trump administration’s attacks on Harvard University, Powell used a commencement address at Princeton on Sunday to call on students to protect democracy and described American universities as a “crucial national asset”.
US central bank officials have warned that Trump’s policies risked delivering both slower growth and higher inflation, but have indicated that they had time to analyse the effect of the measures on the economy before making any new moves on monetary policy.
If the prevailing impact of Trump’s policies were to speed up inflation, it would argue for keeping interest rates higher for longer, whereas if there was an adverse shock to employment, it would argue for lower interest rates. But the labour market has remained relatively strong while inflation has been steady.
Additional reporting by Lauren Fedor
