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Former President Donald Trump said the Federal Reserve should not cut interest rates before the presidential election, according to an interview he did with Bloomberg Businessweek.
In a June 25 interview that was published on July 16, Trump said the Fed may cut rates before the election, but it's something Fed Chair Jerome Powell and Fed members "know they shouldn't be doing."
His comments are at odds with what some economists and Democratic lawmakers have said about the need for cuts soon.
Mark Zandi, chief economist of Moody's Analytics, told Business Insider that when rate cuts do happen, it could "provide immediate relief" for consumers, small businesses, and lower- and middle-income households. For instance, interest rates on credit cards could come down, he said, which would benefit consumers.
Trump's remarks echo his previous claims that the Fed could become politicized ahead of the presidential election as opinions on the timing of interest rate cuts split across party lines. The Federal Open Market Committee has two interest rate decisions scheduled before the election in July and September.
The Federal Reserve is meant to operate independently and apolitically.
"Congress has entrusted the Federal Reserve with operational independence that is needed to take a longer-term perspective in the pursuit of our dual mandate of maximum employment and stable prices," Powell said before the Senate Committee on Banking, Housing, and Urban Affairs on July 9.
The FOMC monitors economic data to decide when to cut rates without spurring inflation. According to market predictions, the central bank is expected to once again hold rates steady during its July meeting but potentially cut in September.
Trump said the Fed has a "dream" to lower interest rates, but he'd advise against it. "Right now, you have to keep rates where they are," he said, citing general inflation as a concern.
"Inflation is a country buster," Trump said, and while he said he knows Fed members want to cut interest rates, he would not do so before the presidential election.
June inflation data showed consumer prices increased 3% year-over-year, the lowest rate in a year. Some economists think it's time to cut rates, with cooling inflation and job growth suggesting the Fed's job is already mostly done.
"I think it's past time for them to cut interest rates," Zandi said. "I think they have achieved their objective of full employment and inflation at target."
Meanwhile, Claudia Sahm, chief economist at investment management firm New Century Advisors and former Fed economist, said indicators show it's time to cut rates.
"We have seen the US economy has been getting back on track, normalizing, rebalancing, all of the Fed's catchwords for some time now," Sahm said.
Zandi thinks the Fed will start making rate cuts in September. He noted that the bar for cuts is higher than it typically is because the Fed fears a reacceleration of inflation. He also noted that the election a few months away could play a role.
"They're thinking maybe if they start cutting rates, they're going to be brought into the political debate, and it's a pretty uncomfortable place to be," he said.
This isn't the first time Trump has criticized Powell and the FOMC's interest rate decisions. During a February interview with Fox News, Trump accused Powell of being "political" and planning interest rate cuts to coincide with the election.
"I think he's going to do something to probably help the Democrats, I think, if he lowers interest rates," Trump said, adding that "it looks to me like he's trying to lower interest rates for the sake of maybe getting people elected."
Powell has consistently maintained the Federal Reserve is an independent entity that does not consider politics or policymaking in its decisions. Powell said in April during Stanford's Business, Government, and Society Forum that "our analysis is free from any personal or political bias, in service to the public."
"But our decisions will always reflect our painstaking assessment of what is best for our economy in the medium and longer term — and nothing else," Powell said.
Zandi said the Fed may want to have a few more months of "good inflation statistics" — like the consumer price index data for June, which was released on July 11 — so that it can "mitigate the risk that they become politicized."
Trump allies were reportedly writing a plan to curb the independence of the Federal Reserve and allow Trump to have a say in interest rate decisions should he win the upcoming election, according to The Wall Street Journal.
Trump told Bloomberg Businessweek that while he's had his "own disputes" with Powell, he would allow him to finish his term as Chair of the Federal Reserve if Trump thought he "was doing the right thing."
