As tensions grow between the administration and the independent overseer of the country’s monetary policy, Donald Trump visited the Federal Reserve’s headquarters in Washington to tour the site of a $ 2.5 billion renovation of two historic buildings. The White House has criticized this move as overly expensive and ostentatious.
Less than a week before the central bank’s 19 policymakers meet for a two-day rate-setting meeting, where they are expected to leave the US central bank’s benchmark interest rate range of 4.25 to 4.50 percent, will the rare presidential visit to the Fed occur.
Trump has repeatedly urged the Fed to lower rates by 3%, and he has frequently posed the possibility of firing Jerome Powell, despite the president’s claim that he has no intention to do so.
Trump referred to the Fed chief as a “numbskull” on Tuesday.
As the two officials toured the unfinished project on Thursday, Trump publicly criticised Powell for the cost of a significant building renovation.
Trump and Powell both silently shook their heads as Trump claimed the project cost $3.1 billion, which is significantly higher than the Fed’s $2.5 billion figure.
“This came from us,” you ask? Prior to realizing that Trump was including the Martin Building’s renovation, which was finished five years ago, Powell said.
Do you anticipate any additional overruns of money? Trump posed a question.
Don’t expect them, Powell remarked.
Trump threatened to fire someone who worked as a real estate developer because of cost overruns. If Powell were to lower interest rates, the president made a joke about it.
As Powell watched with his face expressionless as he said, “I’d love him to lower interest rates”, Trump said, “I’d love him to do that.”
In order to prepare for the session, Powell typically spends the Thursday afternoon before a rate-setting meeting making back-to-back calls with Fed bank presidents.
Trump elevated him to the top of the Fed in 2018, and then reappointed him as president by appointing Joe Biden four years later. Powell last spoke with Trump in March, when the Republican president called him in to demand that he lower rates.
Trump is attempting to discredit a campaign promise by refusing to release documents pertaining to Jeffrey Epstein, a convicted sex offender. Epstein died in 2019.
Trump has recently intensified his pressure on Powell, accusing the Fed of running the renovation and putting forth unfavorable decisions and potential fraud.
Treasury Secretary Scott Bessent called for an in-depth review of the Fed’s non-monetary policy operations, citing operating losses at the central bank as a cause for concern about the renovation’s spending, and White House budget director Russell Vought has estimated the cost overrun at “$700m and counting.”
These losses are caused by the Fed’s policy rate management, which includes paying banks to park their cash at the central bank. The Fed reported a total net loss of $114.64 billion in 2023 and $77.56 billion in 2024, a turnaround from years of record profits to the Treasury at low interest rates and inflation.
The spotlight has undergone renovations.
The project, which is the first complete renovation of Washington’s two buildings since they were constructed nearly a century ago, encountered unexpected challenges, including toxic materials abatement and higher-than-estimated materials and labor costs, according to the Fed in letters to Vought and lawmakers and with supporting documents posted on its website.
Fed staff escorted a small group of reporters around the construction sites prior to Trump’s visit. They spoke over the sounds of drills, banging, and saws as they whizzed around cement mixers and construction equipment. In addition to tariffs and escalating labor and material costs, according to Fed staff, security features, such as blast-resistant windows, are major cost-cutters.
The move-in is scheduled for March 2028, and the renovation project started in mid-2020. According to the pool report, a visit to the roof of the Eccles Building revealed an impressive view of the Lincoln Memorial and the National Mall, which was brought to light by White House critics who were concerned about the renovations’ ostentatiousness.
The cost of rooftop seating, according to staff, had been reduced because it appeared to be an amenity and one of only two changes from the original plan. The other was a couple of anticipated fountains were canceled.
The Republican who visited Powell on Wednesday and sent him a letter asking questions about the cost and other details of the renovation as well as Powell’s own statements about it is a part of the visit as well.
Trump’s visit had a modest response in the market. After data revealed new jobless claims dropped in the most recent week, higher yields were added to benchmark 10-year Treasury bonds, indicating a stable labor market that lacked the support of a Fed rate increase. Wall Street’s stock was sparse, in fact.
Trump’s criticism of Powell and his feigning dismissal have previously upended financial markets and threatened a fundamental principle: that central banks are independent and free from political meddling.
His visit contrasts with a small number of other Fed-related visits that have been documented. In 1937, the newly constructed headquarters, one of the two Fed buildings currently being renovated, was dedicated by then-President Franklin Delano Roosevelt. In 2006, former US President George W. Bush visited the Fed to swear in as its chief financial officer.
Is it important to have central bank independence?
Senator Cynthia Lummis, a Republican member of the Senate Banking Committee, said, “I think it’s important that he send a signal that he really isn’t happy with how things are going at the Fed.” She claimed Trump made a “good decision” during the visit.
Senator Mike Rounds, a Republican who chairs the Senate Banking Committee, stated on Thursday that Powell’s independence as Fed chief is “critical for the markets.” He added that Powell’s appointment was “critical for the markets.” I believe he did a good job of that.
According to Rounds, “I think the more information the president can get from this, the better off we are in terms of resolving any issues that are still unresolved,” adding that Powell had stated “that they have had a significant amount of money, just in terms of foundation work and so forth, that was not anticipated to begin with.”
Former Fed chiefs Janet Yellen and Bernanke wrote an opinion piece for The New York Times this week, warning that the public’s belief that the US central bank is politically independent and willing to make tough decisions is “an important national asset.” It is difficult to acquire and difficult to lose.
Economic experts are in agreement with each other.
The credibility of central banks around the world has been instrumental in lowering inflation expectations and lowering inflation across many nations in the world, according to International Monetary Fund spokesman Julie Kozack on Thursday. “As we’ve seen through the disinflation process that has been taking place over the last few years, we’ve seen that.
“Understanding independence must coexist with clear accountability to the public, of course.
