Are Trump’s criticisms of Fed policy based on economic conditions?

US PRESIDENT Donald Trump has lately been heaping abuse on Federal Reserve chair Jerome Powell – not least over the supposedly mismanaged renovation of the Fed’s headquarters – and even drafted a letter sacking Powell, whose term runs until May 2026.

In Trump’s view, Powell should force interest rates down by 300 basis points – or let someone else do it. Is there any logic behind Trump’s demands? To answer this question, it is revealing to look statistically at what determines whether Trump criticises the Fed for interest rates that are too high versus too low.

The pressure Trump is putting on the Fed is fundamentally misguided. Perhaps the most important insight from the last half-century of monetary economics is that central banks under direct government control tend to abuse their power.