US President Donald Trump and the head of the Federal Reserve, Jerome Powell, met on Thursday and disagreed publicly over renovation costs at the central bank’s headquarters.
The project has become the latest flashpoint in Mr Trump’s increasing anger at the central bank for not lowering interest rates. The Fed is currently renovating two historic buildings originally constructed in the 1930s as part of a plan first approved by the Fed’s board in 2017.
Speaking alongside Mr Powell, Mr Trump said renovation costs had risen to $3.1 billion, well above the initial $2.5 billion cost overrun previously reported.
Mr Powell, chair of the Federal Reserve, could be seen shaking his head before an awkward exchange took place between the two.
“I’m not aware of that,” Mr Powell said.
Mr Trump said: “It just came out,” before handing Mr Powell a piece of paper to which the Fed chair said the President “just added a third building”.
“It’s a building that’s being built,” Mr Trump said. Mr Powell responded: “No, it was built five years ago. We finished Martin five years ago … it’s not new,” he said, referring to the William McChesney Martin Jr Building, which was not part of the project.
When asked by a reporter what Mr Powell could say that would lead him to ease his criticism, Mr Trump responded: “I’d love for him to lower interest rates,” playfully smacking Mr Powell on the back.
Mr Powell did not take any questions.
Rare presidential visit
Mr Trump’s visit to the Fed marked a significant escalation in his pressure campaign on Mr Powell to cut interest rates.
The White House has framed the visit to tour the renovation of two Fed buildings. Some observers believe the Trump administration’s on the renovation costs are a pretext to fire Mr Powell.
However, Mr Trump appeared to back off on his threat to fire Mr Powell.
“To do that is a big move and I don’t think that it’s necessary,” he said.
Presidential visits to the Federal Reserve are rare, with the commander-in-chief generally taking precautions to preserve the central bank’s autonomy. The last president to visit the Fed was George W Bush in 2006, when he swore in Ben Bernanke as chairman.
Mr Trump elevated Mr Powell to lead the central bank in 2018 and he was reappointed by former president Joe Biden in 2022. He visited the Trump White House in May, telling the President that rate decisions will be made “as required by law”.
The White House budget director Russ Vought previously argued Mr Powell has “grossly mismanaged” the Fed through the approximate $700 million cost overrun. Meanwhile, Treasury Secretary Scott Bessent has called for an extensive review of the entire Federal Reserve system.
In a letter responding to Mr Vought, Mr Powell said the project was large in scope because the renovation involves two buildings that were constructed in the 1930s that have never undergone a comprehensive renovation.
Mr Powell has linked cost overruns to unforeseen circumstances such as more asbestos than previously thought, toxic contamination in the soil and a higher-than-expected water table.
The Fed has also responded by posting a separate page on its site about the renovation project, including a virtual tour.
The Federal Reserve Board, which is overseeing the project, had approved it in 2017.
Mr Trump’s visit to the Fed also takes place as he seeks to deflect attention away from a crisis over his administration’s refusal to release the full investigation into Jeffrey Epstein.
Fed rates in focus
While the renovations are the latest flashpoint Mr Trump’s anger at Mr Powell, the main focus of his ire is interest rates.
Mr Trump has grown increasingly frustrated with the Fed’s extended rate-cut pause and at times publicly considered firing Mr Powell. Mr Trump last week said he had brought up the suggestion to Republicans from the House of Representatives, but said it was “highly unlikely” he would try to oust the Fed boss.
The US central bank has held its interest target rate range steady at 4.25 to 4.50 per cent this year due to uncertainty surrounding tariffs.
But Mr Trump has repeatedly called for the Fed to lower interest rates by as much as 3 percentage points from its current level.
Mr Trump said lowering the rate to 1 per cent would help save “One Trillion Dollars a year on Interest Costs”, a concept known as fiscal dominance. However, the US spent $1.1 trillion in interest on its debt last year, according to data from the Federal Reserve Bank of St Louis.
An analysis from the non-partisan Congressional Budget Office also showed that the recently passed One Big Beautiful Bill Act – Mr Trump’s signature tax bill – would add trillions of dollars to the US deficit over the next decade before interest.
Lowering rates to help finance debt would also lead the Fed to stray from its core mission: price stability and full employment. Economists argue that pursuing fiscal dominance leads to higher bouts of inflation.
Recent data have shown that the effects of tariffs are beginning to creep into the US economy. The Labour Department reported last week that inflation had ticked up in June. Underlying data showed that prices in everyday items such as household appliances, toys and apparel are being passed down to consumers.
Some economists, however, argue that the Fed should begin cutting rates soon to help protect the labour market. Unlike most central banks, the Fed holds a dual mandate of price stability and full employment.
The visit also comes less than a week until the Fed’s next meeting, where it is again expected to hold rates steady.
Projections released by the Fed in June signalled that the central bank expects to cut rates twice this year, although it is unclear when. Traders currently expect the Fed to resume rate cuts in September, according to CME Group data.
Mr Powell has repeatedly said Mr Trump does not have the legal authority to fire him. And such a move would likely lead to a financial crisis as markets would question the independence of future rate moves by the central bank.
Mr Powell remains adamant that he will not resign as Fed chair until his term expires in May 2026.
The bond market was mostly subdued ahead of Mr Trump’s visit, with the yield on the 10-year Treasury up 1 basis point at 4.398 per cent.