David Zervos, one of Fed Chairman Powell’s potential successors, warned this week that the Fed is ignoring the potential impact of the AI storm on the job market. In an interview, he said: “We may have a period of strong economic growth, and the story of AI is really amazing, but the job growth is far from as optimistic as one imagines. Imagine that the economic growth rate can stay at 3.5 to 4% and overall performance is very bright, but the unemployment rate is continuing to climb.”
Zellworth believes the Fed should now focus more on the labor market than on inflation.He noted that some leaders in the field of artificial intelligence had warned at the conference that the United States could lose three to five million jobs in the next three to four years, and even faster.
Some commentators pointed out that the Federal Reserve is facing long-term pressure to seek a balance between "stable prices" and "full employment", and how to maintain independence under the political pressure of the Trump administration will also be an important test in the future.
On September 27, local time, Trump posted a comic book on his social platform in which he shouted to Federal Reserve Chairman Powell, "You're fired!" the move was thought to reflect his long-standing discontent with Powell's cautious interest rate reduction stance and further aggravated tensions between the White House and the U.S. Central Bank. At present, the White House has not yet responded to the matter.
Trump tweeted that the Fed is facing key monetary policy decisions that could have profound implications for U.S. economic growth, inflation and employment rates. It is that removing the Fed’s president will be an unprecedented move, and current laws do not give the president this power. Powell’s term is to end in May 2026.
In a public statement on Tuesday, Powell warned that too radical interest rate cuts could lead to halfway inflation control and be forced to raise interest rates again; but if interest rates remain high for too long, it could put unnecessary pressure on the job market. In contrast, Federal Reserve Chairman Bowman called on the central bank to act “decisively and proactively”, saying the labour market has shown signs of vulnerability and the risk is that policies have lagged behind the situation. Chicago Federal Reserve Chairman Gulspy warned that inflation has been above the target for four and a half years in a row, and too radical measures could also bring new hidden hazards.
Currently, the Fed’s benchmark interest rate is around 4.1 percent, and policymakers expect to cut interest rates twice over the course of the year.
Since personally nominating Powell as chairman of the Federal Reserve in 2018, Trump has repeatedly clashed with him, criticizing him for being too cautious about cutting interest rates, even nicknaming him "Mr. Too Late" and once saying that he would "fire" him, citing high borrowing costs threaten economic growth and weaken the effectiveness of his administration's policies. Earlier this month, the Federal Reserve announced its first small interest rate cut this year, but Trump remained dissatisfied and put pressure on Powell again.
In addition, Trump has previously criticized Powell over the refurbishment of the Federal Reserve headquarters, sparking speculation that Trump may push for resignation on the basis of "legitimate reasons".Al his recent criticism on the matter has softened, he still accuses Powell of harming the economy because of too high interest rates.
To make the situation more complicated, in August this year, Trump tried to fire Federal Reserve Governor Lisa Cook on the grounds of mortgage fraud, but he denied it. Cook has filed a lawsuit challenging the legality of the dismissal, and the Supreme Court is expected to rule soon. The U.S. Department of Justice said the move would not affect financial markets, but lawyer Cook warned that it might undermine the independence of the Federal Reserve.
Trump also publicly stated in August last year that the president should have more power of speech in Federal Reserve decisions. he said he had "earned a lot of money, very successful" and firmly believed his intuition was superior to many Federal Reserve officials and even the president himself.
Red Star Journalist Jan Poe Yu