Summers: Trump's outburst against Powell is just scapegoating; the next Fed chair will still be a "mainstream" pick
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Summers: Trump's outburst against Powell is just scapegoating; the next Fed chair will still be a "mainstream" pick
Former U.S. Treasury Secretary Summers pointed out that Trump's frequent attacks on Fed Chair Powell for refusing to cut interest rates are actually an attempt to set up a "scapegoat" in advance for a future economic downturn, aiming to shift the blame onto the Federal Reserve rather than his own policies.
Navigating Web3 tides with focused insightsBy Long Yue, TechFlow
As Trump once again lashed out at Federal Reserve Chair Powell for not cutting interest rates, former U.S. Treasury Secretary Lawrence Summers saw through the "political theater" — aiming to find a scapegoat for a potential economic downturn.
On June 19, Summers, who served as Treasury Secretary under President Clinton, said on Bloomberg’s “Wall Street Week” that despite Trump’s persistent criticism of Powell for failing to cut rates this year, he still expects Trump to appoint a “mainstream candidate” to succeed Powell. According to Summers, Trump’s attacks on the Fed are less about influencing monetary policy and more about shifting blame should the economy slide into recession.
The Political Calculus Behind Rate Cut Demands
Summers offered a sharp interpretation of Trump’s repeated calls for rate cuts.
“He is setting up a situation where, if we go into a recession, he can attribute it to factors outside his own government’s policies,” Summers explained. This strategic criticism provides Trump with political cover should his economic agenda face headwinds.
Trump recently criticized Powell again for holding the benchmark rate steady. As previously reported by TechFlow, Trump has called on the Fed to slash rates by 2.5 percentage points. He frequently labels Powell “Mr. Too Late,” claiming the Fed chair has cost the U.S. “hundreds of billions of dollars” by delaying cuts.
He even joked: “Can I appoint myself to a Fed position? I’d do a much better job than these people.”
A ‘Mainstream’ Successor: Market Stability Over Political Impulse
Despite Trump’s fiery rhetoric, Summers remains optimistic about the next Fed chair. He believes Trump won’t jeopardize market stability just to appease his political base.
“I would be quite surprised if he didn’t make a choice that bipartisan, fair-minded observers would regard as reasonable,” Summers said.
“I’m more confident about this than some others,” he added, attributing his confidence to financial markets’ swift reactions to such developments.
Powell’s term as chair ends in May 2026. Trump said earlier this month that the nominee for the next Fed chair will be announced “soon.” Previously, current Treasury Secretary Scott Bessent indicated in April that interviews for Powell’s successor would take place “sometime in the fall.” Both Bessent and former Federal Reserve Governor Kevin Warsh are considered potential candidates.
Tariffs as the Source of Supply Shocks
Summers also highlighted the Federal Reserve’s latest economic projections released on Wednesday. Despite falling energy costs this year and signs of productivity gains from artificial intelligence, the new Fed forecasts point to negative rather than positive supply shocks.
“It’s unusual for the Fed to raise both inflation and unemployment forecasts simultaneously,” Summers noted. “That signals a supply shock. And what is it? Tariffs. We are inflicting a supply shock on ourselves, leading to expectations of higher inflation and higher unemployment—making the Fed’s job significantly harder.”
This analysis cuts to the core contradiction in Trump’s economic policy: using tariffs to boost inflation while simultaneously demanding rate cuts to stimulate growth—effectively boxing the Fed into an impossible position.
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