Trump's offensive to subdue the Fed and Jerome Powell

The White House has escalated its pressure campaign against Federal Reserve Chairman Jerome Powell, now targeting the costly renovation of the central bank's headquarters in an unprecedented attempt to force a rate cut or his resignation.

The traditional independence of the Federal Reserve (Fed), the United States central bank, is under unprecedented pressure. The Donald Trump administration has intensified its campaign against Fed Chairman Jerome Powell with a series of public attacks and political maneuvers designed to influence the country's monetary policy, a situation that economists warn could have serious consequences for economic stability.

The White House's most recent tactic was a letter sent by Russ Vought, Trump's top budget adviser, to Jerome Powell. In the letter, Vought stated that the president was "extremely concerned" about plans to renovate the iconic Marriner S. Eccles Building, the Fed's headquarters, suggesting that the "lavish refurbishment" may have violated government regulations.

To increase the pressure, Trump appointed two close advisers to a little-known commission, the National Capital Planning Commission, to review the Fed's construction plans. One of the advisers, James Blair, has already publicly requested a review of all plans and has suggested that Powell was dishonest in his congressional testimony about the project.

This maneuver is just the latest in an "almost daily round of criticism" from Trump toward Powell. The president has publicly called the Fed chief "a very stupid person" and has even demanded that he "resign immediately." Through social media, his message has been unequivocal: "LOWER THE RATE!!!"

Trump's insistence is based on his belief that lower interest rates would make consumer borrowing (mortgages, cars) cheaper and allow the government to finance its growing debt at a lower cost.

Jerome Powell, who was nominated as Fed chairman by Trump himself during his first term, finds himself in an extremely difficult position. He has resisted pressure to cut interest rates largely due to the economic uncertainty generated by the administration's own policies: trade tariffs.

Powell has testified before Congress that Trump's tariffs are the reason the Fed has paused rate cuts, as they could raise prices for consumers and reignite inflation. This situation has been described by economist Diane Swonk as an "uncomfortable purgatory" for the Fed: the administration creates uncertainty and then attacks the central bank for its cautious response.

"Compromising the Fed's independence is bad for the economy, bad for inflation expectations, and therefore bad for long-term inflation." – Sung Won Sohn, professor of finance and economics at Loyola-Marymount University.

This confrontation is not entirely new in US history, and the precedents are alarming. Investigations into the tapes and diaries of President Richard Nixon and then-Fed chairman Arthur Burns in the 1970s demonstrate that political pressure to facilitate Nixon's reelection led to an excessively expansionary monetary policy. The direct result of this political interference was the "Great Inflation" of that decade, a period of economic instability that took years to correct.

Economists view the current situation with great concern. They warn that if the White House succeeds in subduing the Fed, it would erode the institution's credibility, a fundamental pillar of the US and global economy. The perception that the Fed's decisions are political rather than technical could unanchor inflation expectations, making it more difficult and costly to control in the future.

Any decision Powell makes now will inevitably be interpreted through a political lens, a scenario that undermines public confidence in the institution, regardless of whether he decides to cut, maintain, or raise rates.