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Why are Trump and the Federal Reserve at odds?
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The conflict between Trump and the Fed is a naked political confrontation, the core of which is that he firmly believes that the Fed, under the leadership of Powell, is deliberately cooperating with Biden and targeting him. This perception is not only due to policy differences, but also deeply rooted in Trump's obsession with political loyalty and suspicion of establishment manipulation.
Trump has repeatedly accused the Fed of being too cooperative during Biden's term. In 2021-2022, the Fed maintained low interest rates to support the post-pandemic recovery, coinciding with Biden's push for a massive stimulus plan, which Trump interpreted as a covert boost to the Democratic agenda. In contrast, during his term, Powell has gradually raised interest rates since 2018, and maintained high interest rates in 2023-2024 due to high inflation. Trump believes that this directly undermines his economic growth commitments and trade war offensive. He repeatedly declared at the 2024 campaign rally that Powell listens to Biden's words, but sabotages me. Although this narrative lacks direct evidence, it caters to its supporters' distrust of the deep state and strengthens Trump's image as a system challenger.
From a political standpoint, the independence of the Federal Reserve itself is Trump's target. Powell emphasizes that decisions are based on data, but Trump sees this as a political disguise. He believes that as part of the Washington establishment, the Federal Reserve is naturally inclined to maintain the stability preferred by the Democratic Party rather than support its radical America-first reforms. For example, Powell's tolerance of inflation at the beginning of Biden's term was interpreted by Trump as loosening the door for the Democratic Party, while the high interest rates during his term were seen as deliberate constraints. This cognitive bias stems from Trump's extremely high demands for loyalty: any institution that does not fully cooperate is labeled hostile.
Trump's suspicion is not groundless. The Fed has had many frictions with Republican presidents in history, such as Reagan's criticism of Volcker. But Trump's situation is more special. He came to power with an anti-establishment attitude and regarded the Fed as a symbol of the elite. Powell was nominated by Trump, but he did not show the expected loyalty. Instead, he repeatedly emphasized independence in public and even hinted in 2023 that he would not adjust policies due to pressure from the White House. This sense of betrayal convinced Trump that the Fed led by Powell intended to stand on the opposite side of his politics and continue the line of the Democratic moderates.
Trump portrayed the Federal Reserve as an anti-public bureaucratic machine, igniting grassroots voters' anger against elite institutions. He claimed that Powell had made workers and businesses suffer, and attributed high interest rates to a betrayal of ordinary Americans. This political rhetoric not only strengthened his image as a fighter, but also obscured the complexity of the Federal Reserve's independence, further solidifying the narrative against Trump.
