PANews reported on July 12 that according to Jinshi, a faction within the Trump administration that has long wanted to challenge the Federal Reserve's independence has become bolder due to the building renovation dispute. Treasury Secretary Bessent and some economic advisors generally advocate maintaining the Federal Reserve's independence. For example, Bessent refused to criticize Trump regarding the building renovation in a recent Fox Business interview. However, other advisors and external allies have been exploring legal avenues to remove Powell from his position since before the election. Powell said in his testimony last month: "During my tenure, no one wants to undertake a major renovation of a historic building, let alone two buildings that require extensive repairs."
Previously, Trump has been pushing for lower interest rates to reduce government borrowing costs. The Federal Reserve is not expected to cut rates at its meeting later this month, but Powell has hinted that a rate cut might be possible later this year if inflation performs well or the labor market weakens. Trump wants to reduce the debt servicing costs of the federal deficit, and his tax cuts could potentially expand the federal deficit. However, central banks of developed economies will resist such pressure outside of extreme circumstances like war. They believe that maintaining stable inflation is crucial for preserving people's confidence in their national currency.
