Trump Demands Rate Cut, Threatens Powell With ‘Major Lawsuit’
President Trump escalates feud over Fed policy and $3B renovation as markets rally on rate-cut hopes.
President Donald Trump on Tuesday renewed his attacks on Federal Reserve Chair Jerome Powell, demanding an immediate interest rate cut and threatening to “allow a major lawsuit” against the central bank leader over ballooning renovation costs at the Fed’s Washington, D.C., headquarters.
“Jerome ‘Too Late’ Powell must NOW lower the rate,” Trump wrote on Truth Social. “The damage he has done by always being Too Late is incalculable. Fortunately, the economy is sooo good that we’ve blown through Powell and the complacent Board.”
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The President accused Powell of “grossly incompetent” management of the multiyear project to refurbish the Marriner S. Eccles Building and the adjacent FRB-East structure. Trump claimed the work, now estimated at $3.1 billion, “should have been a $50 Million Dollar fix up. Not good!”
“I am, though, considering allowing a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings,” Trump added.
Market Reaction and Policy Standoff
The threat marked Trump’s sharpest escalation yet in a long-running feud over interest rates and the Fed’s spending. The Federal Open Market Committee (FOMC) has kept its benchmark rate steady at 4.25%–4.5% since December 2024, resisting Trump’s repeated calls for steep cuts.
Traders are betting on a quarter-point reduction at the September 17–18 FOMC meeting, with additional easing likely in October and December. Expectations firmed after July’s Consumer Price Index showed annual inflation holding at 2.7%, matching June’s pace.
Markets rallied on the data. The S&P 500 (SPX) gained 1.1% to close at a new record high. The Nasdaq Composite (IXIC) also hit a record high, rising 1.4%, while the Dow Jones Industrial Average (DJI) climbed 1.1%, leaving it just 1% off its all-time high. Technology leaders drove the advance, with Meta (NASDAQ: META) and Broadcom (NASDAQ: AVGO) up about 3%, while Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), and Alphabet (NASDAQ: GOOGL) each added over 1%. Nvidia (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), and Tesla (NASDAQ: TSLA) posted smaller gains, and Intel (NASDAQ: INTC) surged 5.6%.
In bonds and currencies, the 10-Year Treasury Yield (USD10Y) edged up to 4.29%, and the U.S. Dollar Index (DXY) slipped 0.5% to 98.08.
Bitcoin (BTCUSD) rebounded to $120,000 from an overnight low of $118,200, while Gold (XAUUSD) eased 0.2% to $3,400 an ounce. West Texas Intermediate (WTI) crude fell 1.4% to $63.10 per barrel.
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Fed Pushback and Legal Uncertainty
The Federal Reserve declined to comment on Trump’s remarks. Powell has previously defended the renovations as necessary and compliant with federal planning approvals, citing rising material costs, asbestos removal, and unexpected construction challenges, including a sinkhole at the site.
When Trump visited the project in July and claimed costs had exceeded $3.1 billion, Powell replied, “I haven’t heard that from anybody.”
Legal experts note that while the President can exert political pressure, firing the Fed chair mid-term is legally fraught. Powell’s current term runs until May 2026, and he has said he intends to serve it out.
White House Press Secretary Karoline Leavitt, when asked for details on the threatened lawsuit, said, “He’s considering a lawsuit, and I won’t speak on it any further. I will allow the president to do that.”
Political and Economic Stakes
Trump’s criticism comes amid slowing job growth and persistent concerns over tariffs’ impact on inflation. Last week’s downward revision to employment data showed 258,000 fewer jobs added since May than initially reported, strengthening the case for near-term rate cuts. Mortgage rates have already eased slightly, with the 30-year average at 6.63%, the lowest since April.
Still, Fed officials have warned that cutting too aggressively could reignite inflation. “The Fed has been cautious as of late, reluctant to fuel the fire of inflation in the economy at large,” said Joel Berner, senior economist at Realtor.com. “The Fed is fearful that a wave of price hikes is imminent, and cutting rates at the same time would doubly accelerate inflation.”
Trump, however, frames the debate as a matter of immediate national benefit. He argues that lowering rates now would reduce borrowing costs for the government and consumers, fueling growth without spiking prices.
The president’s focus on the Fed’s construction project adds a political layer to the policy fight, with Republicans seizing on the $3 billion-plus price tag as evidence of waste. Trump’s posts suggest he sees the lawsuit threat as a new lever to force Powell’s hand, an unusual tactic in modern U.S. politics.
Whether the Fed shifts course ahead of September remains uncertain. An emergency rate cut before the next scheduled meeting, as Trump appears to want, would be the first since the early days of the COVID-19 pandemic.
For now, the standoff between the White House and the Fed continues to play out in public, with markets parsing every data point and presidential post for clues. If Trump follows through on his legal threat, or if Powell moves rates without waiting for September, the clash could quickly shift from political theater to a defining moment for U.S. monetary policy in 2025.
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