U.S. President Donald Trump attacked U.S. Federal Reserve Chairman Jerome Powell on Thursday because he did not lower interest rates and said he could fire him if he wanted to, renewing threats from his first term, which could inspire problems with long-term political independence of the central bank.
“If I want him out, he will leave there soon, believe me,” Trump said in the Oval Office while asking questions in the Oval Office during a visit with Italian Prime Minister Giorgia Meloni. “I'm not happy with him.”
Trump's comment was an article published on his social media website where the Republican president called on Powell to lower the Fed's short-term interest rate and said: “Powell's termination cannot be swift!”
Powell's term in the chair will end in May 2026.
Powell was originally nominated by Trump in 2017 and was appointed for four years by then-U.S. President Joe Biden in 2021.
In a November press conference, Powell said if Trump asked him to resign, and made it clear in his speech Wednesday that “our independence is a legal issue.”
He added: “We are not mobile except for the reasons. We serve very long, seemingly endless terms.”
Inflation, tariffs and Trump
Trump’s criticism stems from his views, as he said on Thursday: “We are essentially without inflation.”
The Fed drastically raised interest rates in 2022 and 2023 to slow down borrowing, spending and tame inflation, which has steadily dropped from 9.1% in 2022 to 2.4% last month. Inflation is not far from the Fed's goal. The Fed even tripled at the end of last year.
But since then, Powell and most other Fed policymakers have stressed uncertainty due to Trump's comprehensive tariffs, including taxes on all import taxes and 145% taxes on imports from China, including 10% taxes.
In a speech in Chicago on Wednesday, Powell reiterated that the Fed is waiting for a clearer attitude before taking any action and said tariffs could worsen inflation.
Powell firmly insists that the position emphasized by the chairs that the Fed has emphasized since at least the 1970s is independent. At that time, the Fed was widely believed to have exacerbated the Fed's high inflation rate for 15 years as demand for then-President Richard Nixon lowered interest rates over the duration of the 1972 election.
Economic research shows that an independent central bank is more likely to keep inflation because it is more willing to do unpopular things, such as raising interest rates to hit rising prices.
Wall Street investors also largely prefer the independent Fed, although stocks seem to have no response to Trump’s comments.
Powell says the Fed will not be “affected”
Powell said Wednesday that the Fed will be based solely on the best decision for all Americans.
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“That's the only thing we have to do,” Powell said. “We're never affected by any political pressure.”
He also suggested that after the tariffs, central banks will focus on resisting inflation, which could mean they will increase interest rates.
Trump complains that interest rates are still rising: “Because we have a Fed chairman who is playing a political role.” Long-term interest rates have risen after Trump announced a trade fine.
Trump and members of his economic team said they hope that long-term interest rates will make Americans less expensive to buy homes, cars and appliances. However, the Federal Reserve's control of short-term interest rates can only indirectly affect long-term borrowing costs.
A case before the U.S. Supreme Court could allow the president to fire senior officials such as the federal government, such as the Federal Reserve, in an independent agency. Controversially, two Trumps fired the gun and the judge allowed them to stand up when considering the case.
Powell said he is watching the case closely, but may not apply to the Fed given the court's past exemptions to the central bank. Lawyers in the Trump administration have tried to narrow the focus of the case and believe it does not involve the Fed.
Trump said in a 2024 campaign interview with Bloomberg News that he would allow Powell to serve as chairman. “There is certainly no political coercion to the Fed,” Kevin Hassett, Trump's top economic adviser, said in a TV interview earlier this month.
Powell began Trump's second term in a relatively safe location, with low unemployment and closer to two goals of the Fed, which could save him from the president's criticism.
But Trump’s tariffs increase the threat of recession, while inflationary pressures are higher and slower growth is a tough place for Powell, whose mission is to stabilize prices and maximize employment.
Due to Trump's actions and economic changes, the president appears to be looking to blame Powell.
