Even as Federal Reserve (Fed) Chair Jerome Powell faces pressure and threats of criminal investigation from the Trump administration, U.S. business circles are not publicly defending Powell. Given that the independence of the Central Bank is considered a core principle of advanced economies, some call it an unusual silence.
According to CNN on the 13th (local time), Powell recently said federal prosecutors are investigating him and the Fed, arguing, "This is not about the Fed headquarters remodeling expense issue but retaliation for not complying with the president's demand to cut interest rates." He said, "The Fed should set interest rates based on the public interest, not the preference of a particular politician." But financial markets showed only temporary swings, and corporate executives likewise offered no notable public reaction.
The biggest reason U.S. business circles chose silence is the risk of retaliation from a head-on clash with the president. President Donald Trump has in the past publicly pressured corporations that made decisions contrary to his policies. In 2018, when Harley-Davidson transferred some production facilities overseas to avoid the European Union's retaliatory tariff, Trump took it as a personal attack and urged a boycott. As a result, the corporation suffered management troubles and eventually the chief executive officer (CEO) was replaced. The case served as a strong warning signal across the business community.
Another factor was the absence of collective action. In a survey conducted by the Yale Chief Executive Leadership Institute, 71% of the 200 CEOs who responded said "the Trump administration undermined the Fed's independence," and 80% said "pressure on Chair Powell to cut rates does not align with the U.S. national interest." But such views remained private concerns. Even Business Roundtable, the largest U.S. corporate CEO group, did not respond to requests for comment. Analysts say the judgment was that the political expense would be high if an individual corporation spoke out alone.
A final reason was the market's temptation toward low interest rates. While damage to the Fed's independence could increase financial instability in the long run, in the short run expectations of rate cuts can lift stock prices and improve financing conditions. Some corporations and investors regarded the president's pressure as temporary political noise and concluded the market would eventually absorb it. Strategies spread such as the so-called "taco trade," which seeks buying opportunities at lower prices during a pullback after the commotion passes. The taco trade refers to a strategy that bets on the premise that the president backs down after making a menacing remark.
A more cynical interpretation also surfaced. It points out that corporate management is responding more sensitively to short-term stock prices and financing conditions than to the nation's long-term stability. Erasmus Kersting, a Villanova University economics professor, said, "In the past, economic indicators were the most important factor in the Fed's rate decisions, but now the president's preferences carry much more weight."