Elon Musk has set his sights on the Federal Reserve, calling it “absurdly overstaffed” in a post on X (formerly Twitter).
The eccentric billionaire, soon to lead the Department of Government Efficiency (D.O.G.E.) under President Donald Trump, seems interested in picking apart the central bank.
His comment came after the central bank announced a disappointing “hawkish rate cut,” leaving markets rattled and drawing sharp criticism from Trump. The Fed employs about 24,000 people across its 12 regional banks and the Board of Governors in Washington, a number Elon and Trump find excessive.
Elon, alongside entrepreneur Vivek Ramaswamy, is leading Trump’s $2 trillion government efficiency overhaul. “We’re trimming the fat,” Trump said during his campaign. “No one gets to sit around collecting a paycheck for doing nothing — not even Jerome Powell.”
Trump and Elon vs. the Fed and Powell
The President has been gunning for the central bank since day one. He blames its monetary policy for holding back economic growth during his first term and has taken many direct jabs at Powell, the Fed Chair he appointed.
“It’s the easiest job in government,” Trump has mocked. “You show up once a month, say something vague, and then leave the rest to chance.”
Elon’s new role as one of Trump’s closest advisors is amplifying these attacks. With D.O.G.E., he plans to overhaul bloated institutions.
The central bank actually employs far fewer people than its European counterparts. Germany, France, and Italy’s central banks alone surpass the Fed’s staffing levels, but Trump thinks it’s still too big.
Christine Lagarde, President of the European Central Bank, fired back at his comments. “I have thousands of hard-working people—economists, jurists, computer scientists—who defend the euro every day, not just once a month,” she said. Powell, for his part, has remained silent, true to form.
The Fed’s hawkish cut
San Francisco Fed President Mary Daly described Last week’s announcement of a 25-basis-point rate cut as a “close call.” Recently, she explained that the decision was the end of the recalibration phase, which forced them to take a more cautious approach.
Markets did not take it well. The S&P 500 dropped nearly 3%, and the Nasdaq 100 tanked 3.6%, reflecting investor fears of prolonged inflation and slower monetary easing. The FOMC also revised its projections for 2025, raising the median estimate for the federal funds rate to 3.9% from 3.4%.
This means fewer rate cuts are coming, with just two more anticipated instead of the previously expected six or even four. Daly said that policymakers must remain flexible, saying, “We’ll adjust if inflation drops faster or if the labor market weakens significantly.”
The labor market’s strength and persistent inflation risks have forced the Fed into a tight spot. Earlier this year, it implemented rate cuts in September (50 basis points) and November (25 basis points) to counter signs of economic slowdown.
But inflation has proven stubborn, leaving the Fed to balance growth and stability.
The Fed’s budget and staffing
The Fed’s 2024 budget climbed 6.3% to $6.053 billion, covering operations, staff salaries, and services to the U.S. Treasury. It plans to employ 21,238 full-time workers, a 1.9% increase from last year.
Elon has called this growth “unacceptable,” pointing to technological advancements that should reduce the need for additional personnel.
Trump’s broader economic policies could add to the Fed’s challenges. His proposed tariffs and tax cuts are expected to drive inflation up by 2.5 percentage points, potentially pushing core inflation above the 2% target by 2025.
Analysts warn that the Fed may have to even delay next year’s two rate cuts until the fourth quarter due to this. Meanwhile, Powell has defended his office’s independence, saying its decisions are made for the benefit of all Americans, not political agendas.
But Trump doesn’t care. “Why should unelected bureaucrats have the final say on our economy?” he asked. “We’re taking back control.”
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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