'Political drama': Why a clash between Trump and the Fed may be unavoidable

U.S. Federal Reserve Chairman Jerome H. Powell has made it abundantly clear that he considers his position strictly apolitical — that his focus is on economics, not politics.

But the Washington Post's Catherine Rampell, in her November 21 opinion column, lays out some reasons why a clash between Powell and President-elect Donald Trump may be unavoidable in 2025.

"Forget the tariffs and mass deportations," Rampell argues. "The sleeper economic issue of the next few years — the one where President-elect Donald Trump could wreak the most permanent damage — is sabotage of the Federal Reserve."

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Powell, the Post columnist emphasizes, "clearly hopes to avoid any political drama" and is "not looking for a showdown with Trump."

Rampell recalls that during his first term as president, Trump "threatened to fire" Powell and "hoped to bully the Fed into slashing interest rates and printing more money, whether the economy needed a boost or not." And she fears that in 2025, Trump will do the same thing again.

"Why is Trump obsessed with lower interest rates?" Rampell explains. "Well, as the self-proclaimed 'king of debt,' his own finances benefit when the cost of borrowing goes down. More importantly, low rates can also help him politically, at least in the near term. Cheap money makes voters feel richer, which encourages them to spend more. This sugar rush can be good for incumbents."

Rampell continues, "In the long run, though, overheating the economy fuels inflation. And the remedy required to cool inflation — raising interest rates — is quite painful…. Powell and his colleagues clearly wish to stay out of the political fray, but the fray might be coming for them."

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Catherine Rampell's full Washington Post column is available at this link (subscription required).