At an economic symposium sponsored by the Federal Reserve Bank of Kansas City titled, “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy,” Federal Reserve Chair Jerome Powell suggested that an unsteady labor market could benefit from lower rates.
In July, the Federal Reserve Open Market Committee (FOMC) held the federal funds rate steady at 4.25%-4.50% for its fifth consecutive meeting. The Fed’s decision came amid increased pressure from President Trump and members of his administration to drop rates, after accusations of overspending on renovations to the Federal Reserve headquarters in D.C.
The next Federal Open Market Committee (FOMC) meeting where the Board of Governors can vote on a rate change is scheduled for September 16-September 17.
“Putting the pieces together, what are the implications for monetary policy? In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation,” said Powell during an address at the Jackson Hole, Wyoming symposium. “When our goals are in tension like this, our framework calls for us to balance both sides of our dual mandate. Our policy rate is now 100 basis points closer to neutral than it was a year ago, and the stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance. Nonetheless, with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
The FOMC, which makes the actual monetary policy decisions, is comprised of all seven governors and five of the 12 regional Federal Reserve Bank Presidents. While the chair has one vote like the other governors, the structure is designed to prevent one individual, including the president, from dictating decisions and policies. Trump appointed Powell as head of the Federal Reserve during his first term in 2018, with his term ending in May 2026.
The Federal Reserve System performs five general functions to promote the effective operation of the U.S. economy:
- To promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy;
- Promotes the stability of the financial system and seeks to minimize and contain systemic risks through active monitoring and engagement in the U.S. and abroad;
- Promotes the safety and soundness of individual financial institutions and monitors their impact on the financial system as a whole;
- Fosters payment and settlement system safety and efficiency through services to the banking industry and the U.S. government that facilitate U.S.-dollar transactions and payments; and
- Promotes consumer protection and community development through consumer-focused supervision and examination, research and analysis of emerging consumer issues and trends, community economic development activities, and the administration of consumer laws and regulations.
Powell Under Fire
Fed Chair Powell has been a constant target of the Trump administration after holding rates steady for such a stretch, including allegations of overspending on renovations to the Federal Reserve’s headquarters in D.C., and lying to Congress about a $2.5 billion price tag to load the facility with lavish amenities.
“I am asking Congress to investigate Chairman Jerome Powell, his political bias, and deceptive Senate testimony, which is enough to be removed ‘for cause,’” said FHFA Chair Pulte in a social media post on X. “Jerome Powell’s $2.5B Building Renovation Scandal stinks to high heaven, and he lied when asked about the specifics before Congress. This is nothing short of malfeasance and is worthy of ‘for cause.’”
President Trump took to Truth Social using his nickname for Powell: “‘Too Late’ should resign immediately!!!” following the allegations.
During a recent cabinet meeting at the White House, President Donald Trump continued pushing for an investigation into Powell over the renovations.
“It’s OK with me. I think he’s terrible,” Trump told reporters. “I call him ‘Too Late.’ “He’s always late. But he wasn’t late with Biden before the election, he was cutting [rates] like crazy.”
According to the New York Post, the projected renovations by the Fed have risen by 30% from original estimates of $1.9 billion.
The Jackson Hole conference is a major event in the world of banking in which the Federal Reserve Chair can set the tone for the remainder of the economic year.
Fed Pressure Continues
The latest round of pressure on the Fed by the Trump administration came earlier this week when Federal Housing Finance Agency (FHFA) Director Bill Pulte targeted Federal Reserve Governor Lisa D. Cook, accusing her of mortgage fraud after designating a Michigan home and an Atlanta condominium as her primary residences on loan applications, potentially securing more favorable terms.
“U.S. Federal Housing FHFA, alleges in a Criminal Referral to the Department of Justice that Federal Reserve Governor, Lisa D. Cook, committed mortgage fraud by designating her out of state condo as her primary residence, just two weeks after taking a loan on her Michigan home where she also declared it as her primary residence,” posted the FHFA Director on social media platform X. “When someone commits mortgage fraud, they undermine the faith and integrity of our System. It does not matter who you are—no one is above the law. We have sent a Criminal Referral to the Department of Justice with regard to the allegations against Ms. Cook, and the DOJ should go wherever the facts may lead them.”
Pulte also posted a series of images and documents on X regarding Cook’s Michigan residence and another described as an “Atlanta condo.”
“According to mortgage documents obtained by U.S. Federal Housing, it appears an individual, Ms. Lisa McNeil Cook, has falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statue,” said Pulte in a letter to U.S. Department of Justice (DOJ) addressed to Attorney General Pam Biondi and U.S. Pardon Attorney Edward R. Martin Jr. “This has included falsifying residences statuses for an Ann Arbor, Michigan-based residence and an Atlanta, Georgia-based property in order to potentially secure lower interest rates and more favorable terms.”
According to CSPAN, when President Trump was pressed about Cook’s mortgage fraud allegations, he replied: “Yeah, I’ll fire her if she doesn’t resign. What she did was bad.”
A Shift in Fed Balance?
President Trump recently announced the nomination of Stephen Miran to fill a vacancy at the Federal Reserve’s Board of Governors left by Adriana Kugler, who was appointed to the Federal Reserve Board by President Joe Biden in 2023, and stepped down from her position as Governor on the Fed Board. She will return to Georgetown University as a Professor this fall.
If confirmed, Miran will serve out Kugler’s term, which expires January 31, 2026.
According to CNN, if Cook is pushed out due to the mortgage fraud allegations, and Miran is confirmed, that would shift the makeup of the Federal Reserve Board in favor of Trump, with only two Fed governors appointed by a Democratic president.
