From the Fed to Esenyurt: The Political Anatomy of Interest Rates

Being an enemy of Donald Trump isn’t all that difficult. The media, immigrants, Greta Thunberg, even wind turbines have all landed on his blacklist. But there’s one figure Trump considers even more dangerous than Xi Jinping: Jerome Powell. Yes, the Chairman of the Fed — that is, the head of the world’s most powerful central bank. A figure who not only determines the course of the U.S. economy, but also shapes everything from interest rates to exchange rates, borrowing costs to capital flows in global markets. In Trump’s eyes, just another technocrat who does nothing but raise interest rates.

Trump’s anger at Powell reached its peak in the summer of 2025 and has turned into a full-on social media meltdown. On his own platform, Truth Social, Trump called Powell “a total and complete moron.” Then he branded him “very dumb,” “hard-headed,” and following a rate decision, simply “stupid.” Not stopping there, Trump went a step further and declared Powell “a major loser,” attacking not only his policy but his persona. In short, Powell has become the main political — and psychological — punching bag of Trump.

But what’s really behind this clash? And why does it concern not just Washington, but also Ankara, Gaziantep’s industrial zone, or a home loan in Esenyurt, Istanbul?

What Is the Fed, and What Is It Not?

The Federal Reserve — or the Fed, for short — is the central bank of the United States. Established in 1913, its mission is to ensure financial stability, manage monetary policy, supervise banks, and, of course, control inflation.

Its institutional structure is somewhat complex and quite different from Turkey’s central bank: The Fed consists of 12 regional reserve banks and a Board of Governors in Washington. The Chair (currently Jerome Powell) leads this board, and is appointed by the U.S. President, though Senate confirmation is required. The term is 4 years, renewable. Importantly, the Fed generates its own budget and does not receive direct funding from the U.S. Treasury — which grants it financial autonomy.

So, it’s not formally subordinate to the government, but it isn’t fully independent either, since its leadership is politically appointed. This makes it both a powerful and controversial institution.

But here’s the crux: the U.S. dollar is the global trading currency. About 60% of the world’s foreign exchange reserves are held in dollars, and roughly half of global trade is conducted in dollars. The prices of essential commodities like oil are also set in dollars. As such, the Fed’s interest rate decisions impact not just the U.S., but the entire world.

When the Fed raises rates, the dollar appreciates. This increases borrowing costs for developing countries and accelerates capital flight. In countries like Turkey, which carry large amounts of foreign debt, it leads to currency shocks, inflation, and upward pressure on domestic interest rates. In other words, a single sentence from Powell can raise the price of tea in a back alley teahouse in Istanbul.

Trump vs. Powell: The War on Interest Rates

In 2025, Trump is back in the Oval Office, and he sees economic management as part of his personal show. He wants to supercharge the economy. In his eyes, that depends on one thing: LOW INTEREST RATES.

Powell, however, points to the inflationary pressures of Trump’s tariffs and says, “Inflation expectations remain high; therefore, we must keep rates steady.” One wants to press the gas pedal, the other the brakes. For Trump, that’s unacceptable. To him, a central banker who raises rates is a “traitor to the economy.”

But Powell’s concern isn’t just Trump — it’s defending the Fed’s “independence.” This is where the ideological and theoretical stakes become clear.

Central Bank Independence: Myth or Reality?

Since the 1980s, central bank independence has become a cornerstone of neoliberal economic thought.

Its theoretical foundation lies in Kydland and Prescott’s “time inconsistency” problem and Barro-Gordon–style rational expectations models. Turkey’s post-2001 monetary regime also leaned heavily on this framework: inflation targeting combined with central bank independence was presented as a stabilizing, neoliberal cure-all.

The argument was that elected politicians would always be tempted to loosen monetary policy for short-term gain, so monetary decisions should be left to technocrats. Thus, the idea that central banks must be “independent” to ensure inflation control became an unquestionable dogma.

Supposedly, these technocrats would base their decisions on data, not political pressure. But a closer look reveals that these decisions often systematically benefit specific interest groups.

A Critical Perspective: Independence for Whom?

From a critical political economy viewpoint, central bank “independence” is often not about neutrality — it’s about institutionalizing class power.

What’s presented as “independence” is often a policy framework that’s closed to the demands of workers but wide open to the expectations of financial capital.

When central banks raise rates in the name of fighting inflation:

• Investment contracts.
• Unemployment rises.
• Wage growth is suppressed.
• Public spending is cut.

The winners? Bondholders, investors, and financial elites.
The losers? Workers, small producers, and the general population.

As we’ve seen in crises, these so-called “independent” institutions can conjure up unlimited liquidity to rescue markets — but when it comes to social spending, they call for austerity.

So the issue isn’t just independence. It’s: independent from whom, and working for whom?

What About Turkey?

In Turkey, central bank independence was legally recognized after the 2001 crisis via IMF-backed reforms. But in practice, this independence has always been contested — especially when it comes to interest rate policy and capital flows.

After 2018, with the shift to a presidential system, the central bank’s leadership was frequently changed under political pressure.

President Erdoğan’s claim that “interest causes inflation” turned monetary policy into a matter of presidential decree. The result? Rates were cut under pressure, inflation soared, and the Turkish lira suffered historic depreciation.

But the problem isn’t limited to the AKP era. Even in the so-called independent period of 2001–2015, Turkey relied heavily on high-interest, low-currency policies to attract short-term capital inflows. This model suppressed wage growth and limited public investment.

In short: regardless of the model, monetary policy in Turkey has often served financial markets more than the public interest.

Not Independence, Not Authoritarianism — But For Whom?

The Trump–Powell clash isn’t just a clash of egos. It reveals the core contradictions of 21st-century economic governance: Should monetary policy serve the public or financial markets? Should we prioritize inflation control or employment? Should we protect capital or people?

Trump’s authoritarian attacks on the Fed don’t mean democratization. Though he uses populist rhetoric, his economic policies — tax cuts, deregulation — overwhelmingly favour the wealthy.

But that doesn’t mean the current model of central bank “independence” defends the people either. The truth is: neither authoritarian interference nor technocratic detachment serves the public by default.

So, the question isn’t just “politics or technocracy?” It’s who is economic management for — and in whose name?

And that’s a question not just for the U.S., but for Turkey, as well.

Maybe the solution isn’t for central banks to be “independent,” but to be accountable to the people, not against them.

Because whoever controls monetary policy determines everything from bread prices to rent, from unemployment to debt. And believing that this enormous power is merely a “technical” matter — that’s the real naivety.