Trump Says ‘Powell Let Us Down’ After Fed's Quarter-Point Cut

(Bloomberg) -- President Donald Trump said Federal Reserve Chairman Jerome Powell “let us down” by delivering an interest-rate cut that's not aggressive enough to fight the trade and currency battles his administration is waging.

Trump, who called this week for a “large” cut in the benchmark rate, took to Twitter to slam the Fed's 25 basis-point reduction. And while the Fed chief played down expectations of more cuts to follow, Trump said he should've done the opposite.

The president says the Fed should be supporting his administration's efforts to make America more competitive with rivals such as China and allies in Europe. He's accused those countries of manipulating their currencies -- including via lower interest rates -- in a bid to grab export markets.

Trump wants Powell to follow suit. He's had the central bank in his crosshairs since last year, when it raised interest rates four times. The president has also discussed currency intervention with his aides to weaken the dollar and told reporters last week that he had not taken such measures off the table.

He's not the only elected leader applying more pressure on monetary officials who are supposed to be insulated from politics. It's happening in countries from Turkey to India -- leading some investors and economists to fret about the future of central-bank independence.

While the president delivered a thumbs-down verdict after Wednesday's decision, he did credit Powell for halting the Fed's offloading of its securities portfolio, which Trump calls quantitative tightening, earlier than expected.

The Fed said Wednesday it will halt the balance-sheet shrinking as of Aug. 1, instead of at the end of September as previously scheduled.

Read More: Trump, Turkey threaten heyday of central-bank independence

Trump's frustration with the Fed reached a point where he began asking aides about his ability to oust Powell, in discussions reported by Bloomberg News on Dec. 21.

Advised that he doesn't have the authority to fire Powell outright, the president asked White House lawyers in February to explore whether he could strip him of his chairmanship, a legally dubious move that could lead to a messy court battle. After Bloomberg News reported this twist, Trump said on June 23 that he has the power to demote Powell.

Powell has said repeatedly that he intends to serve his full four-year term as chair and that “the law is clear” on that issue. Earlier this month, in answer to a question from lawmakers during his testimony before Congress, Powell said he wouldn't step down from his job if Trump attempted to fire him.

Read more: All the Trump Quotes on Powell as Fed Remains in the Firing Line

While the president's demand for a more aggressive Fed is echoed by some investors, the case for a sharp cut in interest rates isn't obvious to everyone.

U.S. stocks are high, unemployment is around the lowest in a half-century and consumers continue to spend. There's also a risk that lower rates will lead to asset bubbles and excessive borrowing that will haunt the economy later.

--With assistance from Josh Wingrove.

To contact the reporter on this story: Ben Holland in Washington at bholland1@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Scott Lanman, Alister Bull

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