Introduction
Since taking office on January 20, 2025, Trump has urged Powell to cut interest rates in various ways. However, Powell and hawkish officials have consistently refused to lower rates, citing inflation as the reason, especially after the outbreak of the &#34;tariff war,&#34; when hawkish officials began to argue that &#34;the impact of tariffs on inflation may not be a one-time event.&#34; As a result, the rate cut that was supposed to take place in June this year has been continuously postponed.
At the Jackson Hole central bank annual meeting on August 22, Powell finally hesitantly announced a shift in monetary policy:
The risks facing the labor market are rising, and inflation remains a threat. Nevertheless, current policy is in a restrictive zone, and the baseline outlook and changing risk balance may require us to adjust our policy stance.
Trump is very angry about Powell's remarks on inflation, stating:
Inflation has not occurred, and all signs indicate that interest rates should be significantly lowered. Powell should have cut rates a year ago; he is too late.
In other words, there are significant differences between Trump and Powell on two key points:
1. Whether the impact of tariffs on inflation is a one-time event;
2. Whether cutting interest rates will stimulate inflation;
If we dogmatically believe that &#34;cutting interest rates will stimulate inflation,&#34; then Trump is clearly being unreasonable and obstructing the Federal Reserve's anti-inflation efforts. But is the dogma that &#34;cutting interest rates will stimulate inflation&#34; necessarily correct??
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/MTc4NTc1NzM3MA==?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/MTc4NTc1NzM3MA=="/><img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE0Mzk1NzM1NTU=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE0Mzk1NzM1NTU="/>
As shown in the figure above, China's benchmark policy interest rates have continued to decline in 2023 and 2024, yet inflation shows no signs of improvement. Therefore, this dogma is not universally applicable; it has very strict conditions for application.
<h2>Textbook Scenario</h2>
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/ODY4NTY0MzQ5?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/ODY4NTY0MzQ5"/>
First, we need to return to the source of the dogma—the textbook scenario. In the textbook scenario, there is only one central bank in the world, so there is no deposit flow caused by differences in policy interest rates. Therefore, the main factor at play is the loan interest rate. When loan interest rates rise, the willingness of the real economy to borrow decreases, leading to a reduction in monetary creation; conversely, when loan interest rates fall, monetary creation increases.
Clearly, this is a model that is overly simplistic and unrealistic. We need to further relax the assumptions and allow for the existence of multiple central banks.
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE4MTk4NTk5NjY=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE4MTk4NTk5NjY="/>
As shown in the figure above, we slightly modify the assumptions to allow for two types of central banks in the world: one is the Federal Reserve, and the other is other central banks. If we want the dogma of &#34;reducing stimulus to the economy or inflation&#34; to hold, we must require one point: Other central banks must closely follow the actions of the Federal Reserve; if the Federal Reserve cuts rates, other central banks must also cut rates, and vice versa.
This &#34;follower hypothesis&#34; is very important, as it ensures two outcomes:
<ol>
<li>
Deposits will not experience large-scale cross-border flows due to interest rate spreads;
</li>
<li>
The impact of loan interest rates on the economy is primary;
</li>
</ol>
With this reasoning, we can't help but ask, what would happen if other banks do not follow the Federal Reserve? Or, what would happen if other major central banks move in the opposite direction to the Federal Reserve?
<h2>Duopoly Model</h2>
The answer is straightforward: loan interest rates become a secondary contradiction, while cross-border deposit flows caused by interest rate spreads become the primary contradiction.
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE2NzMwOTUxODE=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE2NzMwOTUxODE="/>
As shown in the figure above, if the U.S. banking system raises interest rates while other central banks keep rates unchanged, there will be a global &#34;deposit migration,&#34; with a large amount of deposits flowing into the U.S. banking system, leading to an expansion of the U.S. balance sheet. Conversely, the balance sheets of other banking systems will contract.
So, why do loan interest rates become a secondary contradiction? Because loan interest rates affect the incremental, while deposit interest rates affect the stock.
Below, we can compare China's fiscal deficit and M2 balance to guide our intuition: In 2025, China's fiscal deficit is 5.66 trillion, and as of the end of July 2025, China's M2 balance is 329.94 trillion yuan, with the former accounting for only 1.71% of the latter.
In other words, a 4% fiscal deficit only accounts for 1.71% of the massive M2 stock, meaning that increasing the M2 growth rate by 2% is equivalent to an additional 4%+ fiscal deficit. Therefore, policy tools that can change the stock growth rate are more critical. Thus, we must modify the &#34;follower model&#34; into a &#34;duopoly model&#34;: <img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/OTgxNDg4MTg0?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/OTgxNDg4MTg0"/> As shown in the figure above, other central banks no longer follow the Federal Reserve but instead act in reverse, 1. When the Federal Reserve raises interest rates, other central banks lower rates, leading to deposits flowing into the U.S.; 2. Conversely, when the Federal Reserve lowers rates, other central banks raise rates, leading to deposits flowing out of the U.S.;
Thus, the primary function of interest rates is reversed, with rate hikes leading to an increase in money supply, stimulating inflation; and rate cuts leading to a decrease in money supply, suppressing inflation.
It is evident that Federal Reserve officials are playing a trick; they are well aware that the basic conditions for &#34;rate hikes suppressing inflation&#34; do not exist:
1. The People's Bank of China does not follow the Federal Reserve;
2. Even the European Central Bank, the Bank of England, and the Bank of Canada do not follow the Federal Reserve; they have already lowered rates early on;
Clearly, reality is closer to the &#34;duopoly model,&#34; where global deposits remain in the U.S. due to the Federal Reserve's high interest rates, leading to a certain stickiness in the U.S. CPI.
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/MTc1NjEzMjEwMg==?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/MTc1NjEzMjEwMg=="/>
So, what is the Federal Reserve being so pretentious about inflation for?? Therefore, what the Federal Reserve is really worried about is not inflation, but that after interest rate cuts, the outflow of international hot money will directly plunge the United States into recession.
<blockquote>
When the tide goes out, you find out who has been swimming naked.
</blockquote>
<h2>From the Federal Reserve to the People's Bank of the United States</h2>
Using the &#34;dual oligopoly model&#34; to look at the problem, we can discover the basis for Trump's constant calls for interest rate cuts—because it is the Federal Reserve that is not wearing pants, and cutting interest rates will strip the Federal Reserve of its pants.
Regarding the U.S. policy interest rate, Trump has two important views:
<ol>
<li>
Due to Powell's maintenance of high interest rates, the public finds it difficult to obtain mortgage loans, severely harming the real estate industry;
</li>
<li>
There is no inflation, and all signs indicate that interest rates should be significantly lowered;
</li>
</ol>
The first viewpoint tells us that the monetary tightening in the U.S. only affects the real estate industry, which is a localized issue; the second viewpoint implies that the high deposit rates in the U.S. have attracted a large amount of international hot money, and as long as this hot money leaves, there will be no inflation in the U.S., only wounds and devastation.
Thus, we see a very strange phenomenon: despite Trump obtaining a new board seat after the resignation of Governor Krogler, and although Powell has already shifted at the Jackson Hole central bank annual meeting, the Trump administration still relentlessly seeks to further dismiss Federal Reserve Governor Lisa Cook.
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE3MjM0MTc5NTI=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE3MjM0MTc5NTI="/>
Why is this?? This requires us to return to the political core of Anglo-American countries—the &#34;Magna Carta,&#34; the essence of this document is that the noble class restricts the king, meaning their freedom is the freedom of the nobility, not the freedom of the common people; the means by which they achieve noble freedom is by limiting the king.
With this key, we can easily understand many things about the United States. The so-called &#34;independence of the Federal Reserve&#34; does not mean that the Federal Reserve is independent of any organization, but rather that it is independent of the king, independent of the federal government.
So, who does the Federal Reserve take orders from?? Of course, it is the noble class, specifically represented by Wall Street financial capital. <img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTIxMjI5MDY5OTA=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTIxMjI5MDY5OTA="/>
As shown in the image above, cutting interest rates will lead to a collective recession in the &#34;rent-seeking industry&#34; in the U.S., which is what Wall Street cannot tolerate, and is the fundamental reason why Powell has been standing firm against Trump.
Moreover, the so-called U.S. Congress is not a power entity, but rather a shackle placed on the federal government by the noble class, and the function of this shackle is to—prohibit the king from doing certain things, meaning that the noble class in the U.S. itself is a power entity.
It is not difficult to see that Trump's ambitions are actually quite large; the traditional system in the U.S. has set up many firewalls for the independence of the Federal Reserve, and Trump wants to break down these firewalls, transforming the &#34;American Noble Bank&#34; into the &#34;People's Bank of the United States.&#34;
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE5NzczOTEwOTI=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE5NzczOTEwOTI="/>
As shown in the figure above, based on the political logic of the Magna Carta of 1215, we should not simply regard &#34;the dismissal of Federal Reserve Governor Lisa Cook&#34; as a mere economic event, i.e., a negotiation chip for Trump to force the Federal Reserve to significantly cut interest rates. We should see it as an extremely significant political event, reflecting a planned and purposeful attack by the king on the noble group. As Besant hinted in an interview, since the 2008 financial crisis, the Federal Reserve has deviated from its original intention and no longer represents the interests of the American people.
Therefore, once the Federal Reserve substantively begins to cut interest rates, international hot money will flee, and various data in the U.S. will quickly decline. At that point, the Federal Reserve will completely lose its moral support, and the Trump administration's substantial purge of the Federal Reserve will begin.
<blockquote>
TOO LATE, is it a planned and purposeful dereliction of duty??
</blockquote>
<h2>Conclusion</h2>
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTEwNDg0OTY0OTU=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTEwNDg0OTY0OTU="/>
As shown in the figure above, after the Jackson Hole central bank annual meeting, the U.S. stock market briefly strengthened before starting to decline again.
If we break away from the dogma of &#34;interest rate cuts stimulating inflation,&#34; it is not difficult to understand the deeper meaning behind the market feedback:
<ol>
<li>
Interest rate cuts will not only fail to stimulate inflation but will instead expose recession;
</li>
<li>
Hot money has already begun to withdraw from the U.S.;
</li>
<li>
Those hawkish officials at the Federal Reserve have already secured a lot of time for everyone, and it is impossible to secure more;
</li>
</ol>
In addition, the attempt to &#34;dismiss Federal Reserve governors&#34; exposes Trump's greater ambition to transform American noble banks into a People's Bank of the United States, which will be an epic-level reshaping of the global financial system.
Once interest rate cuts are implemented and hot money withdraws, more problems will emerge. This will substantiate Trump's accusation against the Federal Reserve of &#34;TOO LATE,&#34; and the Federal Reserve will completely lose its moral foundation—so it turns out you were just covering it up.
<img src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE5NDk3MDA1ODA=?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://bang.xuangubao.cn/LTE5NDk3MDA1ODA="/>
Thus, this will lead the Federal Reserve into an even more unfavorable political situation, making it difficult to resist the Trump administration's restructuring of the FOMC (abbreviation for the Federal Open Market Committee). Ultimately, Trump is likely to become the one who changes history, ending the Federal Reserve's status as a nation within a nation and completely transforming it into the People's Bank of the United States.
In a few decades, future generations will surely wonder why some countries' central banks can engage in profit-making for special classes under the banner of &#34;independence.&#34; This is the absurdity of history. Let us wait and see.
ps: Data from Wind, images from the internet
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The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account individual users' specific investment objectives, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk

Trump and Federal Reserve Chairman Powell have significant differences on the issue of interest rate cuts. Trump believes that inflation has not manifested and that interest rates should be significantly lowered, while Powell refuses to cut rates due to inflation risks. Powell mentioned at the central bank annual meeting in August that policies may need to be adjusted, but there are still inflation threats. The article explores the relationship between interest rate cuts and inflation, pointing out that textbook theories do not always apply in reality, especially in a multi-central bank environment

- Since taking office on January 20, 2025, Trump has urged Powell to lower interest rates, but Powell has resisted, citing inflation concerns exacerbated by the trade war.  
- At the Jackson Hole meeting on August 22, Powell acknowledged rising risks in the job market and the persistent threat of inflation, indicating a potential policy shift.  
- The article argues that Trump's push for rate cuts reflects a broader political ambition to transform the Federal Reserve into a more populist institution, challenging its independence and the interests of financial elites.