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Key Takeaways
- President Donald Trump said Thursday that Federal Reserve Chair Jerome Powell should be "terminated," renewing his attacks on the central bank's independence.
- Trump's threats came after Powell suggested the Federal Reserve was worried about inflation, implying the Fed is in no hurry to cut interest rates, as Trump has long demanded.
- Powell has stated that he would not quit his post if Trump requested it. The Supreme Court may decide whether Trump has the right to fire Powell.
Donald Trump reiterated his threats to fire Federal Reserve chair Jerome Powell after Powell said he was not in a rush to lower borrowing costs as Trump had long demanded.
Trump attacked Powell on social media after Powell said Wednesday that Trump’s rash of tariffs larger than expected could pose a challenging scenario for the Fed, slowing the economy and pushing up prices. Powell said that officials at the central banks expect the import taxes Trump implemented this month to drive up prices. They are determined to not let the price increase turn into a long period of inflation.
“Powell must be terminated as soon as possible!” Trump wrote on Truth Social.
Trump’s call for “termination” escalated his long-running attacks on Powell and his attempts to exert more influence over the Federal Reserve, which is outside the White House’s direct control.
Trump has long pressured Powell and the Fed to lower the central bank's benchmark interest rate, which influences borrowing costs on all kinds of loans. The Fed has kept the rate higher than normal since 2022 when it raised rates in order to slow down the economy and counter surging inflation.
The Fed is an independent government institution, which was created to make monetary policies based on economic strategies rather than political considerations.
Trump has now threatened to remove Powell from his current post before the end of his term in May 2026. Powell was appointed by Trump to his current role in 2018, and Joe Biden, the former president, gave Powell a second four-year term of office in 2022. Trump has repeatedly criticized Powell during both of Trump’s terms in office. He also pushed Powell to lower interest rates. Lower rates could boost economic growth and benefit Trump politically. However, they also run the risk of inducing inflation over time.
Powell's Not Stepping Down Willingly
Powell’s firing would be a reversal of Trump’s December statement that he did not intend to remove the Fed chair. This would also create a legal dispute: Powell has said that he wouldn’t resign if Trump asked him to, and it is illegal for a president to fire a Fed chair.
The Supreme Court could decide this question. According to a Wall Street Journal article published on Wednesday, the Court is currently examining a case that examines whether the President has the authority to dismiss the heads of government departments previously considered independent from White House control.
Powell said Wednesday that he didn’t know if the Fed would be affected by the decision. “But we are monitoring the situation closely.”
The dispute occurs at a critical time for central bank’s dual missions to keep interest rates as high as possible to keep inflation low, but not so high they stifle employment. This task may become difficult or impossible if Trump tariffs cause a “stagflation”.
Trump said Powell had been “TOO WRONG AND LATE” in criticizing the central bank’s record of managing inflation. Trump and others, including Powell, have said, in hindsight the Fed was slow to raise rates in 2022, after inflation spiked as the economy reopened following the pandemic.
Trump cited recent data to argue now is the right time for the Fed rate cut. Inflation retreated unexpectedly in March due to dropping oil and gas prices. Normal cooling of inflation would prompt the Fed lower interest rates. However, Fed officials expect Trump’s wave of import tax to raise prices.
Trump also cited a recent string of interest rates cuts by the European Central Bank to suggest that the Fed was out of sync with the European counterpart.
“Oil prices are down, groceries (even eggs!) are down [sic]Trump wrote about this in a post. “Too late should have lowered interest rates, like the ECB long ago, but he certainly should lower them now.”
The Bureau of Labor Statistics reports that the prices of groceries, including eggs, rose in March. Wholesale egg prices fell, indicating that prices in stores could follow suit.
This article was written by Senior Editor Nisha Guppalan.
