Warren goes to bat for Powell amid Trump criticism
Massachusetts Sen. Elizabeth Warren, the top Democrat on the Senate Banking Committee, offered support Wednesday for Federal Reserve Chair Jerome Powell, whose policies she frequently criticizes.
President Trump has gone back and forth this week on whether he wants to oust Powell before his term leading the nation's central bank ends next year — which would be an unprecedented move from the executive branch.
Trump said Wednesday it was “highly unlikely” that he would fire the Fed chair, “unless he has to leave [for] fraud," a reference to criticisms regarding the renovations underway at the Federal Reserve Board of Governors building on Constitution Avenue in Washington.
Warren called Trump’s accusation a “pretext” for the president's disapproval of the independent agency's resistance to lowering short-term interest rates.
“Nobody is fooled by this pretext to fire Chair Powell. And markets will tank if he does,” the Massachusetts Democrat said Wednesday during a speech at the Exchequer Club in the nation's capital.
Trump has been telling Powell to lower rates for months, resorting to ridicule and castigation that have failed to produce a change in interest rate policy.
“When his initial attempts to bully Powell failed, Trump and Republicans in Congress suddenly decided to look into how much the Fed is spending on building renovations … give me a break,” Warren said.
The Fed has held off on rate cuts this year specifically due to Trump’s tariff rollout, which economists have expected to be passed along to consumers in price increases. Powell said last month that were it not for the increased foreign import taxes, the Fed would have likely resumed its stimulative rate cuts.
The tariffs are likely just starting to show up in the economic data. The consumer price index popped to a 2.7-percent annual increase in June from 2.4 percent in May and 2.3 percent in April, marking the second month in a row of aggregate prices rises.
Prices rose on import-heavy goods like appliances, home furnishings and electronics, which many economists this week saw as a smoking gun for tariff inflation.
“U.S. firms are shouldering most of the tariff burden as of now. That will likely change in the second half of 2025 as firms seek to shore up profitability,” Morningstar economist Preston Caldwell wrote in an analysis.
Before throwing her hat in the ring for Powell this week, Warren assumed her more accustomed posture of being critical of the Fed, directing her censure at a proposed rule change on leverage requirements for banks.
The Fed now wants to require banks to hold less capital relative to how much they borrow, arguing that this would help them buy more U.S. bonds, which could lower longer-term interest rates.
The senator, in a letter to Federal Reserve vice chair of supervision Michelle Bowman, said the looser leverage requirement allows for higher profitability on investments rather than ensuring bond-buying.
“[It’s] a move that frees up money to line the pockets of Wall Street shareholders and executives while reducing capital available for lending, protecting depositors, and preventing megabank failures,” she wrote.