President Trump continues to attack Federal Reserve Chairman Jerome Powell, calling him a “major loser” in a social media post on Monday and urging him to lower interest rates “NOW.”
The latest blast comes just days after Mr. Trump said on April 17 that Powell’s “termination cannot come fast enough.” On Friday, National Economic Council Director Kevin Hassett confirmed that the Trump administration is considering firing Powell.
Mr. Trump’s complaint about Powell’s performance centres on interest rates, with the president arguing that the Fed should take action to reduce the cost of borrowing for consumers and businesses. The Fed has held its benchmark rate steady since its most recent cut in December, despite the bank’s efforts to bring price increases closer to its 2% annual target.
Mr. Trump has pointedly contrasted the Fed’s caution in lowering interest rates with the European Central Bank’s decision on April 17 to cut its benchmark rate by a quarter of a percentage point.
The Fed’s most powerful weapon against inflation is to raise or maintain interest rates, because an increase in borrowing costs reduces economic demand, easing inflationary pressures.
The White House declined to provide any further comment.
Here’s what you need to know about whether Mr. Trump can fire Powell.
Can Mr. Trump fire Powell?
Board members of independent federal agencies, such as the Federal Reserve, can only be removed before their terms expire “for cause.” That precedent was established by the Supreme Court’s landmark 1935 decision, which confirmed Congress’ authority to establish such agencies.
“The fundamental necessity of maintaining each of the three general departments of government entirely free from the control or coercive influence, direct or indirect, of either of the others has often been stressed, and is hardly open to serious question,” the court ruled in Humphrey’s Executor v. United States.
However, Mr. Trump has long challenged political norms, including allowing Elon Musk to reduce the federal workforce through the Department of Government Efficiency, or DOGE. Since Mr. Trump’s second term began in January, he has also fired some independent regulators, which has been challenged in court.
While lower courts ruled that President Trump’s firing of a member of the National Labour Relations Board and a member of the Merit Systems Protection Board was illegal, the Supreme Court temporarily halted those decisions earlier this month.
Who appointed Fed Chair Jerome Powell?
Powell was nominated to lead the Fed by Mr. Trump in 2017, and he was re-nominated to serve another four-year term by President Joe Biden in November 2021.
What is Mr. Trump’s concern about Powell?
Mr. Trump claims that Powell is moving too slowly to lower the Fed’s benchmark interest rates, which affects the cost of borrowing for credit cards, auto loans, and other types of consumer and business debt.
The Federal Reserve’s benchmark rate currently stands in a target range of 4.25% to 4.5%, the highest since 2007, according to Bankrate.
“With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other ‘things’ trending down, there is virtually No Inflation,” Trump tweeted on Monday.
He continued: “With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”
Inflation has fallen from a post-pandemic high of 9.1% in June 2022, but it remains below the Fed’s target of 2% per year. In March, the Consumer Price Index increased by 2.4% year on year, indicating that inflation is continuing to rise.
What has Powell said about Mr. Trump’s tariffs?
Powell has indicated that the Fed is keeping a close eye on the impact of President Trump’s trade policies. In a speech last week at the Economic Club of Chicago, the Fed chief stated that the Trump administration’s tariffs are “significantly larger than anticipated.”
“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he predicted.
Nonetheless, Powell stated that the central bank can afford to wait and see how tariffs and other Trump administration economic policies play out before making any changes to interest rates.
What do investors think of Mr. Trump’s criticism of Powell?
Powell has indicated that the Fed is keeping a close eye on the impact of President Trump’s trade policies. In a speech last week at the Economic Club of Chicago, the Fed chief stated that the Trump administration’s tariffs are “significantly larger than anticipated.”
“The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” he predicted.
Nonetheless, Powell stated that the central bank can afford to wait and see how tariffs and other Trump administration economic policies play out before making any changes to interest rates.
What do investors think of Mr. Trump’s criticism of Powell?
According to Wall Street analysts, Mr. Trump’s harsh criticism of Powell, who has been praised for guiding monetary policy so that inflation is contained without causing a recession, has alarmed investors. Most economists believe the economy will be in good shape by the end of 2024, with solid growth, low unemployment, and cooling inflation.
The market trembled on Monday as it digested Mr. Trump’s latest post about Powell, with the S&P 500, Dow Jones Composite, and Nasdaq all dropping more than 2%. Since its most recent high in February, the S&P 500 has lost more than 16% of its value, putting it in correction territory.
“The risk is now twofold. First, Powell holds the line, and policy remains restrictive for longer than markets had anticipated,” said Nigel Green, CEO of investment advisory firm deVere Group, in a report. “Second, that Trump intervenes — publicly or politically — sparking concerns over central bank independence.”
The Fed has historically maintained its independence, allowing it to carry out its dual mandate of keeping inflation low and the labour market at full employment without political pressure.
What has Powell said about stepping down as Fed chair?
After Mr. Trump was elected in November, Powell stated that he would not resign if asked by the president. Powell has also stated that, under the law, presidents cannot fire or demote the Fed chair. Powell’s term as Fed chair ends on May 15, 2026.
Some lawmakers and other Federal Reserve officials are coming to Powell’s defense. On Sunday, Republican Sen. John Kennedy of Louisiana defended Powell on NBC’s “Meet the Press” and stated, “I don’t think the president, any president, has the right to remove the Federal Reserve chairman.”
“The Federal Reserve ought to be independent,” he argued.
On Sunday, Federal Reserve Bank of Chicago President Austan Goolsbee said on CBS News’ “Face the Nation” that undermining the central bank’s independence could lead to higher inflation, slower economic growth, and lower hiring.
“[T]he fact is, the inflation rate is higher, growth is slower, the job market is worse,” he told me. “So we sincerely hope that we do not enter an environment in which monetary independence is called into question. Because that would undermine the credibility of the Fed.”
William English, an economist at the Yale School of Management and a former senior Fed staffer, told the Associated Press that Trump’s attacks on the Fed aren’t “going to make the American people better off over time.”
They’ll end up in all likelihood with higher inflation, and that is not something that people want,” he said.