Summers: Trump's angry outburst at Powell is just to shift blame, the next Federal Reserve Chair will still be chosen from the "mainstream"

When Trump once again attacked Federal Reserve Chairman Powell for not cutting interest rates, former U.S. Treasury Secretary Summers saw through the intent of this "political performance" — to find a scapegoat for a potential economic recession.

On June 19, former Treasury Secretary Lawrence Summers stated on Bloomberg's "Wall Street Week" that despite Trump's ongoing criticism of Federal Reserve Chairman Powell for failing to cut interest rates this year, he expects Trump to appoint a "mainstream candidate" to succeed Powell. Summers believes that Trump's criticism of the Federal Reserve is more about shifting blame in the event of a potential recession rather than genuinely trying to influence Federal Reserve policy.

The Political Calculations Behind Calls for Rate Cuts

Regarding Trump's repeated demands for the Federal Reserve to cut interest rates, Summers provided a sharper interpretation.

"He is creating a situation where, if we face a recession, he can blame it on factors outside of his government policies," Summers analyzed. This strategic criticism provides Trump with political cover when economic policies may face challenges.

This week, Trump again criticized Powell for maintaining the benchmark interest rate. A previous article from Wall Street Journal mentioned that Trump reiterated his call for the Federal Reserve to cut rates by 2.5 percentage points. He frequently pointed out that "too late, Mr. Powell" has caused the U.S. to "lose hundreds of billions of dollars" by not cutting rates.

He even joked, "Can I appoint myself to the Federal Reserve? I would do a much better job than these people."

"Mainstream" Successor: Market Stability Considerations Over Political Impulses

Despite Trump's verbal attacks, Summers remains optimistic about the next Federal Reserve Chair candidate. He believes Trump will not sacrifice market stability to cater to his political base.

Summers stated, "I would be quite surprised if he does not make a choice that fair observers from both parties would consider reasonable."

Summers said, "In this regard, I am more confident than some." He attributes this confidence to the financial markets' rapid response to relevant news.

Powell's term as chairman will expire in May 2026. Trump stated this month that the next Federal Reserve Chair candidate "will be announced soon." Previously, current Treasury Secretary Scott Bessent mentioned in April that the timeline for interviewing Powell's successor is "sometime in the fall." Bessent himself and former Federal Reserve Governor Kevin Warsh are both listed as potential candidates.

Tariff Policy as a Source of Supply Shock

Summers also paid special attention to the latest economic forecasts released by the Federal Reserve on Wednesday. He pointed out that despite a decline in energy costs this year and the application of artificial intelligence indicating productivity gains, the new Federal Reserve forecast shows negative rather than positive supply shocks.

"It is not common for the Federal Reserve to raise both inflation and unemployment rate expectations," Summers noted, "so you see the arrival of supply shocks. What is it? It's tariffs"We are imposing supply shocks on ourselves, which has led to expectations of higher inflation and higher unemployment rates—making the Federal Reserve's job more difficult."

This analysis points directly to the core contradiction of Trump's trade policy: on one hand, raising inflation expectations through tariffs, while on the other hand, demanding the Federal Reserve to cut interest rates to stimulate the economy, which is essentially creating a dilemma for the Federal Reserve