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Ex-Fed official says Trump pressure 'may have held up' rate cuts from happening sooner

Key Points
  • "It may have been counterproductive. So I don't think he did it because of the pressure," Gerald O'Driscoll, former vice president of the Federal Reserve Bank of Dallas, told CNBC.
  • Powell reiterated during his congressional testimony this week that he intends to serve his full term and said he would not resign if Trump asked.
  • Trump has also spoken with Powell on the phone several times this year. The topic of conversations in those calls has not been made public.
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Expect as many as three rate cuts this year: Former Fed governor

President Donald Trump's public pressure on Jerome Powell to lower interest rates may have made the Federal Reserve chairman reluctant to do so, a former Fed official told CNBC on Thursday.

"It may have held up his being willing to cut rates. It may have been counterproductive. So I don't think he did it because of the pressure," Gerald O'Driscoll, former vice president of the Federal Reserve Bank of Dallas, said on "Closing Bell."

Recent statements from the Fed have strongly hinted that a rate cut is coming at the end of the month, and investors read Powell's congressional testimony this week as confirmation. The Dow Jones Industrial Average achieved a record close Thursday following Powell's appearance on Capitol Hill.

Trump has repeatedly criticized the Fed's policy choices, both in interviews and on Twitter, calling for lower interest rates. The Fed has held rates steady so far this year after several hikes in 2018.

The president has reportedly considered demoting or firing Powell from his position. Larry Kudlow, the top White House economic advisor, said Tuesday that Powell's job was safe "at the present time."

Powell reiterated during his congressional testimony this week that he intends to serve his full term and said he would not resign if Trump asked.

Trump has also spoken with Powell on the phone several times this year. The topic of conversations in those calls has not been made public.

Randy Kroszner, a former governor of the Federal Reserve, said on the same "Closing Bell" segment that serving as part of the Federal Reserve often comes with a lot of public pressure, even under different presidents.

"I was there during the financial crisis, from 2006 to 2009. That was a pretty tough time to be there too," Krozner said. "The Fed is sort of always in the crosshairs. The criticism has been much more explicit, but during the financial crisis there was a lot of pretty explicit criticism of the Fed, so it's always tough to be there."

The Federal Reserve Board declined to comment on O'Driscoll's statements.

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Key Points
  • Fed Chairman Jerome Powell needs to stress the institution's independence as he testifies before Congress this week, says CNBC's Jim Cramer.
  • President Trump has repeatedly criticized Powell and the Fed for its monetary policy decisions.
  • "At a certain point, he has to say he is not going to do what the president tells him to do," Cramer says of Powell. "He's got to defend the institution."