Donald Trump and his top allies quickly jumped on a hotter-than-expected inflation report Thursday to slam the Biden/Harris administration, the Federal Reserve and central bank chairman Jerome Powell.
“The fact is that the Federal Reserve brought the interest rates down a little too quickly,” former President Donald Trump said Thursday afternoon during an appearance at the Detroit Economic Club.
“It was too big a cut and everyone knows that was a political maneuver that they tried to do before the election,” he added.
It was the most direct critique from Trump of Powell in months and came after an initial reaction from the GOP nominee to the September interest rate cut of 50-basis-points where Trump often focused on charges of a bad economy over critiquing the central bank directly.
“It was totally a political decision and inflation has started to rise,” Trump said Thursday while also charging that high interest rates “really kills the American dream for young people.”
Make America Great Again Inc. — a Trump supporting Super-PAC — also jumped in with a release Thursday saying Thursday’s inflation reading could be part of “the Fed’s worst nightmare.”
Overall, prices as measured by the Consumer Price Index increased 2.4% over the last year, which marked a slight deceleration following August’s 2.5% annual gain in prices.
But the lower annual readings were largely overshadowed by a monthly increase in September of 0.2% over August, hotter than economist estimates of a 0.1% uptick.
Democrats, including the Biden/Harris administration, chose to focus on that annual number in their reactions with National Economic Advisor Lael Brainard offering in a statement that “inflation has fallen back down to 2.4%, the same rate as right before the pandemic.”
“We keep making progress,” she added.
Political headaches for Powell
The Federal Reserve’s Open Market committee won’t gather again until after election day. Thursday’s inflation reading appeared to offer new momentum for central bank hawks counseling a more gradual pace of interest rate cuts in the months ahead.
And some initial reaction suggested a change in strategy is not likely no matter what Trump says.
Likely 25-basis-point cuts at last two meetings of the year are “pretty much baked into the cake,” offered Max Kettner, HSBC chief multi-asset strategist, in a Yahoo Finance Live Appearance Thursday.
But Atlanta Fed president Raphael Bostic did tell The Wall Street Journal Thursday following the CPI release that he was “totally comfortable” with holding steady next month and that he had already penciled in an estimate of just one more rate cut this year.
What Thursday’s campaign trail commentary could do is mark a return to political headaches for Powell that have ebbed and flowed over the course of 2024.
In August, Trump said he would like a “say” in setting interest rates, raising the prospect that the Republican nominee could seek to reduce the independence of the Federal Reserve if he wins in November.
He was even blunter earlier in the year, when he told Bloomberg in June that cuts are something “they know they shouldn’t be doing.” That came after a February Fox Business interview when Trump said of cuts: “I think [Powell’s] going to do something to probably help the Democrats.”
But when a cut finally came, Trump’s initial reaction was to focus on the economy.
“I guess it shows the economy is very bad to cut it by that much assuming that they are not just playing politics,” Trump said in September a few hours after the cut.
“It was a political move,” he offered a few days later in a Newsmax interview but only at the urging of the interview and after Trump had first mentioned the economy.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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