Donald Trump has said he will only pick a new Federal Reserve chair who will cut US interest rates, as he called on the central bank to slash borrowing costs to 1 per cent.
The president also renewed his attack on the current chair Jay Powell, describing him as a “stubborn mule” and saying he would “love him to resign if he wanted to”. Powell has said he will serve the duration of his term, which ends in May 2026.
“Whoever’s in there will lower rates,” Trump told reporters in the Oval Office on Friday, referring to his pick to replace Powell. “If I think someone is going to keep rates where they are I’m not going to put them in.”
Trump’s comments mark the latest barrage in an unprecedented attack by a US president on the head of the country’s central bank. He has repeatedly decried the Fed’s decision to keep rates on hold at 4.25-4.5 per cent this year, halting a cutting cycle that began in 2024.
“I think we should be paying [rates of] 1 per cent right now,” Trump said. He added that he had told his administration “not to do any debt beyond nine months or so” until a new Fed chair takes office. Despite his comments, the Treasury is due to sell long-dated bonds over the next fortnight.
Trump said earlier this week that already he has a shortlist of “three or four names” to run the Fed, although the White House told the Financial Times that no decision was “imminent”.
His pressure on Powell has brought speculation that he could pick a “shadow Fed chair” who agrees with him on lowering rates quickly.
Christopher Waller, a Fed governor who is seen as a candidate to replace Powell, has backed a rate cut as soon as July. Kevin Hassett, another candidate who now heads the National Economic Council at the White House, has supported lowering borrowing costs too.
Scott Bessent, the US Treasury secretary who is also in the running, has said the yield on two-year Treasury notes indicate that the Fed should cut rates.
Another candidate, former Fed governor Kevin Warsh, has signalled that he believes the central bank’s focus should be on fighting inflation, suggesting he is more hawkish than the other candidates.
Many believe the shadow strategy could backfire.
“Although it sounds like a clever idea, it doesn’t hold up,” said Robert Barbera, an economist at Johns Hopkins University. “The reason is because the Fed’s not a kingship.”
The Fed chair sets interest rates alongside 18 other members of the Federal Open Market Committee. Eleven besides the chair also have a vote.
“If the next chair tried to flex the muscles he doesn’t really have yet, it would mainly damage relations with the rest of the committee,” said Jon Faust, a former special adviser to Powell who is now also at Johns Hopkins. “That would decrease the influence the new chair would have coming in.”
Raghuram Rajan, a University of Chicago academic who came under political pressure as head of the Reserve Bank of India, said the Fed’s unique structure — with a centralised board backed by 12 private regional banks — insulated rate-setters from being unduly influenced by the president’s rhetoric.
There was “very little” that the president could do to influence the regional presidents or other Fed governors, Rajan said.
Additional reporting by Kate Duguid in New York