A new battle between President Trump and Federal Reserve Chairman Jerome Powell has many similarities to their clash in 2019, but some sort of different ending is all but certain.
Both episodes featured a standoff over lowering interest rates amid a climate of tariff uncertainty, both had plenty of charges of political interference in all directions, and both were notable for a fusillade of insults emanating from the White House.
“There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump posted this week, referring to Powell.
In 2019, Trump offered a similar message. “The only problem we have is Jay Powell and the Fed,” he said then, adding, “he’s like a golfer who can’t putt, has no touch.”
But this latest back-and-forth comes amid a different economic landscape. Stocks were generally rising, and the economic outlook was seen as solid in 2019, unlike the rising uncertainty of recent weeks.
It also comes after Trump has made more concrete moves since returning to office to potentially back up his insults with action.
President Donald Trump waves after announcing Jerome Powell as his nominee for Chairman of the Federal Reserve at the White House in 2017. (SAUL LOEB/AFP via Getty Images) ·AFP Contributor via Getty Images
This latest flareup was kicked off by a speech from Powell last Wednesday where he stressed that Trump’s tariffs could create a “challenging scenario” and suggested he would wait for clarity before considering any additional interest rate adjustments.
“This feels like round two of an old fight,” Ann Berry, Threadneedle Ventures founder, noted in a recent Yahoo Finance appearance, adding, “We knew this was going to be an issue that would come up.”
Yet the result could end up being different this time around, with a looming Supreme Court decision that could make firing Powell easier and a timeline where, one way or another, Powell’s term in office is likely to end before Trump’s.
Trump is not the only one pulling out an old playbook. Powell is also repeating some of the same messages he delivered as he tried to navigate a first round of Trumponomics at the end of the last decade.
In the summer of 2019, the central banker traveled to Jackson Hole, Wyo., soon after the announcement of new tariffs on Chinese imports.
“Trade policy uncertainty seems to be playing a role in the global slowdown,” Powell offered during that speech.
It was part of a larger message that day about moving slowly in cutting rates due to a “complex, turbulent” picture.
In 2019, Jerome Powell testified before Congress in front of a banner listing Trump’s many criticisms. (BRENDAN SMIALOWSKI/AFP via Getty Images) ·BRENDAN SMIALOWSKI via Getty Images
Powell is returning to such commentary now, as he preaches caution in the face of many economic uncertainties. It is a pace that Trump, both then and now, has no patience for.
That very same day in 2019, he offered one of his broadsides against Powell with perhaps his most shocking charge: “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” he posted on social media.
Trump attacks in that era were unceasing — numbering more than 100 — with Trump publicly and privately maintaining he could fire Powell if he wanted but declining to test it.
That 2019 standoff ended up being subsumed by the 2020 COVID-19 pandemic with Powell swiftly cutting rates to zero in response to that economic crisis. That issue overshadowed the rest of Trump’s term and averted a direct standoff.
Federal Reserve Chairman Jerome Powell during the Jackson Hole Economic Symposium in 2023. (AP Photo/Amber Baesler) ·ASSOCIATED PRESS
Yet Trump’s long-held grievances have clearly remained. The president, both now and in 2019, clearly desires a central bank that is more accommodative to his wishes.
“Powell has always been ‘To [sic] Late,’” Trump wrote this week.
He added an oft-repeated charge that Powell has been political in the other direction, saying a Federal Reserve rate cut last year was done to help Democrats.
“How did that work out?” Trump added.
Indeed, how this chapter in the feud ends will likely be different.
For starters, Trump has taken more aggressive action this year to fire the heads of independent agencies, a move that could eventually apply to Powell himself.
The president has put before the Supreme Court the question of whether he can fire the board members of two other independent agencies — the National Labor Relations Board and the Merit Systems Protection Board.
If the court sides with the White House and that precedent falls, a likely market-rattling firing of Powell could be easier.
Another key difference between 2019 and now is the timeline.
Back in 2017, it was Trump who selected Powell for a four-year term atop the central bank, assuring that his own first term would end first.
This time, the roles are reversed with Powell set to leave his position atop the central bank next year while Trump is still in office.
The president has made clear that Powell will not be getting a third term (he was re-upped in 2021 by President Biden). The question is perhaps whether Trump — like he did in 2019 — continues to lob criticisms without taking action against Powell.
If that similarity to 2019 holds, then Berry of Threadneedle Ventures predicts one similarity will continue.
“Do I think that President Trump is going to rattle his saber right up to the day that Jay Powell finishes his term? Absolutely.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.
