President Donald Trump’s unrelenting campaign to reshape the Federal Reserve is setting the stage for a dramatic policy shift: a return to zero interest rates. As Trump intensifies his attacks on Fed Chair Jerome Powell, sources close to the administration and posts on X indicate that the president is pushing for an ultra-loose monetary policy to supercharge economic growth, regardless of the risks.
Trump has made no secret of his disdain for Powell’s cautious approach. In a December 2024 post on X, he called the Fed’s current 4.25% benchmark rate “a disaster for American businesses” and praised countries like Japan, where rates hover near zero. “Why are we paying to borrow when others get it for free?” Trump wrote, echoing sentiments he voiced at a Pennsylvania rally last month. There, he claimed Powell’s policies were “crushing real estate and manufacturing” and vowed to install a Fed chair who would “get rates down fast.”
While Powell’s term runs until May 2026, Trump’s strategy appears to bypass legal constraints. Insiders familiar with the administration’s thinking, speaking anonymously due to the sensitivity of the matter, say Trump is considering naming a “shadow Fed chair” to signal his preferred direction. Names like former Treasury official David Malpass and economist Judy Shelton, both vocal advocates for low rates, have surfaced in discussions, according to posts on X and a recent Wall Street Journal report.
The push for zero interest rates aligns with Trump’s vision of an economic boom to cement his legacy. During his first term, he frequently criticized Powell for not cutting rates aggressively enough, once tweeting in 2019 that the Fed was “killing our great economy.” Now, with inflation stabilizing at 2.4% in November 2024, per the Bureau of Labor Statistics, Trump argues there’s no excuse for high rates. His team points to sectors like housing, where mortgage rates above 6% have slowed construction, as evidence of the need for drastic action.
Markets are already reacting. The 10-year Treasury yield jumped 15 basis points to 4.1% in late December 2024 after Trump’s latest comments, reflecting investor jitters about potential Fed interference. Yet, equity markets have shown resilience, with the S&P 500 up 2% this quarter, buoyed by expectations of cheaper borrowing. “Trump’s rhetoric is a double-edged sword,” said Priya Misra, head of global rates strategy at JPMorgan Chase & Co. “Lower rates could juice growth, but undermining Fed independence risks long-term volatility.”
A zero interest rate policy (ZIRP) would mark a sharp departure from the Fed’s current stance. Powell, in a January 2025 speech, defended the need for “measured adjustments” to avoid reigniting inflation, citing robust job growth of 180,000 in December 2024. But Trump’s pressure campaign is relentless. A 2023 meeting between the two, reported by Reuters, saw Trump urge Powell to slash rates, a demand Powell rebuffed. Sources say similar tensions are expected at a planned February 2025 sit-down.
The implications of ZIRP are profound. Proponents argue it could spur investment and ease debt burdens, particularly for small businesses. Critics, however, warn of asset bubbles and a weaker dollar. “Zero rates sound appealing until you get runaway inflation or a market crash,” said Nobel laureate Joseph Stiglitz in a recent CNBC interview. Posts on X from economic analysts echo this, with some predicting a housing bubble if rates drop too quickly.
Trump’s endgame seems clear: a Fed that prioritizes his agenda. If Powell resists, the administration may escalate its tactics, from public attacks to appointing loyalists to open Fed governor seats. With two vacancies expected in 2026, Trump could tilt the Board of Governors toward his vision even before Powell’s term ends.
For now, the Fed remains a flashpoint in Trump’s economic strategy. As the president doubles down on his promise of “the greatest economy ever,” zero interest rates are no longer a distant possibility—they’re a looming reality.
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