After months of criticising US Federal Reserve chair Jerome Powell, President Donald Trump took the fight to his front door, publicly scorning the central bank chief over the ballooning costs of a long-planned building project.
Mr Powell pushed back, challenging the president’s latest price tag as incorrect.
Wearing hard hats and grim faces, standing in the middle of the construction project, Mr Trump and Mr Powell addressed the TV cameras.
Mr Trump charged that the renovation would cost $US3.1 billion ($4.7 billion), much higher than the Fed’s $US2.5 billion figure.
Mr Powell, standing next to him, shook his head.
The Fed chair, after looking at a paper presented to him by Mr Trump, said the president was including the cost of renovating a separate Fed building, known as the Martin building, that was finished five years ago.
Jerome Powell fact-checks the document. (Reuters: Kent Nishimura)
Trump applies interest rates pressure
The rare presidential visit represented a significant ratcheting up of the president’s pressure on Mr Powell to lower borrowing costs, which Mr Trump says would accelerate economic growth and reduce the government’s interest payments.
“We have to get the interest rates down,” Mr Trump told reporters away from Mr Powell.
“People are pretty much unable to buy houses.”
However, Mr Powell and other officials have signalled they will likely keep their key rate unchanged at about 4.3 per cent, but may start cutting rates in September.
Mr Trump has ratcheted up pressure on the Fed chair.
The Federal Reserve sets a short-term interest rate that influences other borrowing costs, but it does not directly control those other rates.
Asked if the rising costs of the Fed’s renovation, estimated in 2022 to cost $US1.9 billion ($2.89 billion), were a “fireable offence,” Mr Trump said: “I don’t want to put this in that category.”
“To do that is a big move, and I don’t think that’s necessary,” Mr Trump added.
“I just want to see one thing happen, very simple: Interest rates come down.”
On Truth Social, Mr Trump said: “The cost overruns are substantial but, on the positive side, our Country is doing very well and can afford just about anything — Even the cost of this building!”
Live updates: Trump clashes with US Fed ChairÂ
Can Trump fire Powell?
Mr Trump may be able to remove Mr Powell by accusing him of mismanaging the bank’s renovation project.
The push comes after a months-long campaign by Mr Trump to try to rid himself of the politically independent central banker, who has resisted the Republican president’s calls to slash interest rates out of concerns about the administration’s tariffs sparking higher levels of inflation.
The Supreme Court recently signalled that Mr Trump could not fire Mr Powell simply because the president disagreed with him on interest rates.
But legally, he could do so “for cause”, such as misconduct or dereliction of duty.
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Mr Trump has seized on that provision, indicating that Mr Powell’s handling of an extensive renovation project on two buildings in Washington could be grounds to take the unprecedented and possibly legally dubious step of firing him.
The project has been underway for years, going back to Mr Trump’s first term. But it only recently caught the White House’s attention.
Ousting Powell risks setting off market panic
The Fed chair has been an obstacle in Mr Trump’s efforts to gain total control over the executive branch.
Mr Powell and his board have the dual mandate of maximising employment and keeping prices stable, a task that can require them to make politically unpopular moves such as raising interest rates to hold inflation in check.
Mr Powell has found himself facing the brunt of Mr Trump’s displeasure. (Reuters: Kevin Mohatt)
The general theory is that keeping the Fed free from the influence of the White House — other than for nominations of Fed officials — allows it to fulfil its mission based on what the economy needs, instead of what a politician wants.
An attempt to remove Mr Powell from his job before his term ends would undercut the Fed’s longstanding independence from day-to-day politics and could lead to higher inflation, higher interest rates and a weaker economy.
A headquarters more than 90 years old
The Fed says its main headquarters, known as the Marriner S Eccles Building, was in dire need of an upgrade because its electrical, plumbing and air conditioning systems, among others, are nearly obsolete and some date back to the building’s construction in the 1930s.
The renovation will also remove asbestos, lead and other hazardous elements and update the building with modern electrical and communications systems.
The facade of the Marriner S Eccles Federal Reserve Board Building under construction. (Reuters: Andrew Harnik/Pool)
The Fed says there has been periodic maintenance to the structures but adds this is the first “comprehensive renovation”.
Trump administration officials have criticised the Fed over the project’s expense, which has reached $US2.5 billion ($3.8 billion), about $600 million more than was originally budgeted.
Russ Vought, the administration’s top budget adviser, wrote Mr Powell a letter that said Mr Trump was “extremely troubled” about the Fed’s “ostentatious overhaul” of its facilities.
The Fed says the renovations will reduce costs “over time” because it will be able to consolidate its roughly 3,000 Washington-based employees into fewer buildings and will no longer need to rent as much extra space as it does now.
White House makes another plan of attack
The Fed’s changes to its building plans have opened it up to another line of attack: White House officials have suggested the Fed violated the terms of the approval it received from a local planning commission by changing its plans.
In its September 2021 approval of the project, the National Capital Planning Commission said it “Commends” the Fed for “fully engaging partner federal agencies”.
But because the Fed changed its plans, the administration has indicated it needed to go back to the commission for a separate approval.
Markets brace for more pain as Trump takes on Powell
Essentially, White House officials are saying Mr Powell is being reckless with taxpayer money because of the cost of the renovation, but they are also accusing him of acting unethically by scaling back the project to save money.
James Blair, the White House deputy chief of staff whom Mr Trump named to the commission, said in a post on X that Mr Powell’s June congressional testimony “leads me to conclude the project is not in alignment with plans submitted to & approved by the National Capital Planning Commission in 2021”.
Mr Blair said he intended to review materials from the Fed on how the approved 2021 renovation plans had changed and circulate a letter among his colleagues on the commission that would go to Fed officials.
AP