President Donald Trump’s plans for regime change at the Federal Reserve may not go according to his plan, one analyst warned on Wednesday.
Trump waged a pressure campaign against former Federal Reserve Chairman Jerome Powell during the president’s second term because of Powell’s reluctance to lower interest rates, as the U.S. economy continued to grapple with stubborn inflation. That fight ended when Powell’s term as chairman expired in May, and Trump’s choice to replace him, Kevin Warsh, took over.
However, Trump’s goal of lowering interest rates may not be possible at this point, CNN’s Matt Egan reported on “CNN News Central.” The central bank decided to keep interest rates steady during its first meeting under Warsh’s leadership on Wednesday. The central bank also signaled that a future rate hike is in the works, as the economic fallout from Trump’s war with Iran continues to weigh on the nation’s economic growth.
“This might come as a surprise to some because the Fed is under new management,” Egan said. “Fed chairman Kevin Warsh, of course, was selected by President Trump, who has made no secret of his desire for dramatically lower interest rates. However, this is not something that Warsh can decide unilaterally.”
Egan noted that the war with Iran’s impact on inflation, specifically energy prices, is preventing the Federal Reserve from lowering interest rates as Trump wants.
“The Fed makes these decisions by a committee, and ironically, that committee is now signaling that the next move may not be an interest rate cut,” Egan said. “It may be an interest rate hike because new projections that were just issued by the Fed are now signaling a potential quarter-point interest rate hike by the end of this year. Now, that is a major shift from the last time they issued projections back in March; at that time, Fed officials were penciling in one interest rate cut.”
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