Americans' trust in Fed Chair Powell has fallen to a historic low, with only 37% expressing support.

According to the latest Gallup poll, only 37% of Americans trust Fed Chair Jerome Powell to make the right decisions for the economy, a figure close to a historic low, reflecting a significant decline in public confidence in the Fed’s economic policies. Powell is currently in his second term, and this trust rating is the second lowest of his tenure, only higher than the level during Janet Yellen’s time as Fed Chair in 2014. Looking back to 2020, Powell enjoyed a public trust rating of 58%, but his support has since dropped significantly, indicating public skepticism about the Fed’s ability to address economic challenges.

Jackson Hole Meeting: Powell Hints at Imminent Rate Cuts

At the recent Jackson Hole Economic Policy Symposium, Powell delivered his final keynote speech as Chairman of the Fed. At this time, the U.S. labor market is slowing down, which usually prompts the Fed to lower interest rates to stimulate the economy. However, inflation remains above target levels, and the Fed must be cautious to avoid further pushing up prices. Powell stated in his speech that monetary policy may need to be “adjusted,” which in Fed terminology usually means that interest rate cuts are on the horizon, expected to begin next month and possibly continue through the following two meetings.

This statement caught the market off guard. Previously, the market expected Powell to continue his usual cautious rhetoric, but his clear hints triggered a strong market reaction: the dollar exchange rate fell, bond prices soared, and the stock market rebounded after a week of sluggishness. However, this decision also comes with risks. Analysts at the Bank of America warned that if the Fed lowers interest rates too early before the job market recovers, it could lead to a policy misstep, especially given that inflation remains above target. The August employment report will be released in early September, and if the data shows an unexpectedly strong job market, the Fed’s interest rate cut decision may seem premature.

Trump’s Pressure: The Independence of the Fed Faces Challenges

Shortly after Powell’s speech, U.S. President Trump publicly targeted Federal Reserve Board member Lisa Cook, claiming that she should resign due to issues with her mortgage documents, or she would be fired. Trump even made this statement while wearing a red hat that said “Trump is always right.” Cook responded that she would not be “bullied,” but her position appears weak in the current political environment. Trump’s criticism of Powell has been longstanding, repeatedly calling him an “idiot” and a “fool,” accusing him of failing to significantly cut interest rates earlier.

Trump is not only dissatisfied with Powell personally, but he is also gradually undermining the independence of the Fed by placing his confidants in key positions. He has appointed ally Stephen Miran to a temporary position at the Fed, who has argued that the president should have the authority to dismiss central bank officials at will. In addition, Trump has replaced the head of the Bureau of Labor Statistics with one of his supporters. These actions indicate that Trump is attempting to bring the Fed under his political influence.

The Future of the Fed: The Game of Independence and Political Pressure

The Fed should theoretically be independent of political interference, with data-driven monetary policy at its core. However, as Trump’s influence grows, the independence of the Fed is facing severe challenges. The market has begun to worry, as the bond market shows signs that long-term government bonds are underperforming compared to short-term government bonds, indicating that investors believe the Fed may be pressured by political factors to maintain artificially low interest rates rather than acting based on economic needs. The low interest rate policy may facilitate large-scale spending by the Trump administration, avoiding tax increases to cater to political demands.

Powell reiterated in his speech that he would fight inflation at all costs while closely monitoring the rapid changes in the labor market, showcasing the Fed’s consistent cautious and balanced style. However, as Powell’s term nears its end, the next chair may be more inclined to follow political directives rather than adhere to data-driven decision-making. In the future, if the new chair attempts to express dissent, it may be interpreted by the market as a signal of internal discord or a sign that the chair is losing control. This will make interpreting the intentions of Fed policy more complex, and market uncertainty will further intensify.

Currently, only 37% of Americans trust Powell’s economic decisions, marking a historic low. Meanwhile, Powell hinted at an upcoming interest rate cut during the Jackson Hole meeting, causing market fluctuations, but also carrying the risk of policy missteps. Trump’s ongoing pressure on the Fed and his moves to install loyalists are threatening the independence of the Fed. In the coming year, the Fed may face significant changes, with its policy direction driven more by politics than economic data, leading to greater uncertainty for the U.S. economy and global markets.