US President Donald Trump visited the Federal Reserve‘s headquarters(HQ) in Washington, sparking concerns about the independence of the central bank. The visit, which comes less than a week before the Fed’s rate-setting meeting, is seen as a show of tension between Trump and Fed Chairman Jerome Powell. Trump has repeatedly demanded that the Fed lower interest rates and has questioned Powell’s leadership.
During the visit, Trump publicly scorned Powell for the cost of a $2.5 billion renovation of two historical buildings, claiming it was over budget. Powell silently shook his head as Trump said the project cost $3.1 billion. “This came from us?” Powell asked, before realizing Trump was including the renovation of the Martin Building, which was finished five years ago. Trump joked that he would back off Powell if he lowered interest rates. “I’d love him to lower interest rates,” Trump said, as Powell stood by, expressionless.
The visit highlights the growing tension between Trump and Powell, who was appointed by Trump in 2018 and reappointed by former President Joe Biden four years later. Trump has repeatedly criticized Powell’s handling of monetary policy, and his visit to the Fed is seen as a further escalation of the feud. White House officials have ramped up Trump’s pressure campaign on Powell, accusing the Fed of mismanaging the renovation and suggesting poor oversight and potential fraud.
The Fed has defended its handling of the renovation, citing unexpected challenges such as toxic materials abatement and higher-than-estimated materials and labor costs. The renovation project started in mid-2022 and is on track to be completed by 2027. The move-in is planned for March 2028.
The visit has sparked concerns about the independence of the Fed, with former Fed chiefs Janet Yellen and Ben Bernanke warning that the public’s belief in the Fed’s independence is an “important national asset” that is “hard to acquire and easy to lose.” International Monetary Fund spokesperson Julie Kozack emphasized the importance of central bank independence, saying it is “instrumental in anchoring inflation expectations and bringing down inflation.”
Senator Cynthia Lummis, a Republican member of the Senate Banking Committee, supported Trump’s visit, saying it was a “good decision” and that Powell’s independence as Fed chief is “critical for the markets.” However, she also acknowledged that the Fed’s independence is essential for maintaining market stability.
The market reaction to Trump’s visit was subdued, with the yield on benchmark 10-year Treasury bonds ticking higher after data showed new jobless claims dropped in the most recent week. Stocks on Wall Street were mixed. Trump’s criticism of Powell and flirtation with firing him have previously upset financial markets and threatened a key underpinning of the global financial system: that central banks are independent and free from political meddling.