(Kitco News) – U.S. President Donald Trump has upped the ante in his latest attack on Jerome Powell, threatening to allow a lawsuit against the head of the central bank over the cost of ongoing renovations of the Federal Reserve buildings.
“Jerome ‘Too Late’ Powell must NOW lower the rate,” Trump said in a Truth Social post on Tuesday. “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.”
Trump added that he is “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. Three Billion Dollars for a job that should have been a $50 Million Dollar fix up. Not good!”
The renovations are a sore spot between the president and the Fed chair, with Powell calling Trump out in front of the media on his cost overrun claims during a visit to one of the sites in July.
“It looks like it's about $3.1 billion, went up a little bit, or a lot. So the $2.7 is now $3.1,” Trump said at the time. “I haven't heard that from anybody,” Powell countered, and took Trump’s notes to review the figures. “Are you including the Martin renovation? You just added in a third building, is what that is. It was built five years ago.”
After the tense exchange, one reporter asked, “Are there things the chairman can say to you today that would make you back off some of the earlier criticism?”
“Well, I'd love him to lower interest rates,” Trump answered. “We would be helped if interest rates would come down […] I'd love to see them come down a lot.”
In July, Trump stated that interest rates should be at least 3% lower, which would place them in a range between 1.25% and 1.50%.
Powell also said in congressional testimony in June that the Fed would have already cut rates this year if Trump had not implemented trade tariffs, which many analysts have said could stoke inflation and jeopardize the Fed’s ‘soft landing’ scenario for the U.S. economy.
Rising political tensions between President Trump and the Federal Reserve have been rattling investor confidence, with analysts warning that any blow to central bank independence could send gold prices soaring.
Over the past several months, Trump has launched personal attacks, calling Powell a “dumb guy,” a “moron,” a “knucklehead,” and nicknaming him “Mr. Too Late.”
The uncertainty surrounding central bank leadership is injecting new volatility into markets, and analysts say this environment will only worsen as concerns about the Federal Reserve’s independence grow.
In a July 17 note, Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, described the Federal Reserve’s independence as its “superpower.”
“The consequences of such an attack on the Fed’s independence could be dramatic. Not only would the US dollar and Treasuries tumble, but the Fed would lose a superpower: the one that helps it support turmoiled financial markets by buying billions of dollars in US debt,” she said. “Remember, the US—and a few privileged economic zones—are unique in that government bonds can be supported by their central banks purchasing their debt. This is due to credibility. If that credibility is lost, the Fed loses its most important tool. If QE and the Fed’s expanding balance sheet have worked so well over decades, it’s because the Fed enjoys a level of credibility that few others do. If that credibility disappears, lowering rates would severely hurt both the dollar and Treasuries.”
In this environment, Ozkardeskaya advised investors to keep an eye on safe-haven assets, noting, “it looks like we might see some serious action at the Fed this fall.”
She pointed to Turkey’s central bank as an example of an institution that lost credibility after losing its independence. From 2018 to 2023, Turkish President Recep Tayyip Erdogan pursued a policy of continuous interest rate cuts and currency intervention, even as inflation soared out of control.
Michael Brown, Senior Market Analyst at Pepperstone, also cited Turkey’s economic turmoil as a warning for U.S. investors. He added that such an environment would be favorable for gold.
“When one has to reach for Turkey as an analogy for how monetary policy could end up being set, it isn’t exactly a promising, or reassuring, sign,” he said in a note. “And, in any case, yesterday’s reaction supports my longer-running bearish view: selling rallies in the greenback as any and all pretense of monetary policy independence continues to be eroded, in rather rapid fashion.”
“It appears that the administration is seeking to erode every last shred of monetary policy independence—either right now or via the appointment of Powell’s successor next May,” Brown said in a comment to Kitco News. “Either way, this is going to keep international investors spooked and ensure that reserve allocators continue to seek alternatives to the greenback. Obviously, this is where gold can shine.”
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said he is bullish on gold as the turmoil at the Fed adds to growing geopolitical uncertainty across financial markets.
“If political tensions rise even higher and the Federal Reserve faces more pressure from the White House, the most likely scenario would be increased volatility in the market. Gold, given its past role as a safe haven in times of political and economic volatility, would likely see more use as a store of value,” he said.
Analysts also note that the central bank drama is just the latest addition to a growing list of fundamental factors supporting gold. Like Trump’s ongoing trade war, they say anything that threatens the U.S. dollar’s role as the world’s reserve currency will ultimately drive gold prices higher.
While investment demand has increased this year, analysts emphasize that central bank demand remains a critical factor behind gold’s historic rally over the last three years. Some expect global central banks to boost gold reserves by another 1,000 tonnes this year - for the third consecutive year.
