Tensions are rising between former US President Donald Trump and Federal Reserve Chairman Jerome Powell, and many experts are warning that this could have serious consequences for America’s economy.
Over the past several months, Trump repeatedly criticized Powell for not cutting interest rates fast enough — accusing him of holding back economic growth and even going as far as calling him a “numbskull” and “a major loser.” These harsh words mark a dramatic escalation in what has become a very public clash between political power and monetary policy.
Why Is Trump Targeting Powell?
At the heart of Trump’s frustration is the Federal Reserve’s decision to keep interest rates steady at 4.25% to 4.50%. Trump believes this rate is too high and argues that lowering it — possibly even to 1% — would boost the economy by making borrowing cheaper. But Powell and the Fed disagree. They’ve held rates firm to avoid sparking inflation, especially as Trump’s own tariffs threaten to push prices higher in the coming months.
This disagreement is not new — even during Trump’s presidency, Powell often faced criticism. But things intensified this April when Trump publicly insulted Powell and hinted at firing him.
Can a President Fire the Fed Chair?
Firing the head of the US central bank isn’t easy — and it’s not meant to be. Under the Federal Reserve Act of 1913, a Fed chair can only be removed “for cause,” such as proven misconduct or corruption. Legal experts argue that political disagreement doesn’t meet that standard.
Still, the Trump team appears to be laying the groundwork to justify Powell’s removal. One example? A $2.5 billion renovation of the Fed’s Washington, DC headquarters, which some officials — like Office of Management and Budget Director Russell Vought — have called excessive. Treasury Secretary Scott Bessent also recently accused the Fed of overstepping its role and called for a deeper review of the project.
Analysts like David Wilcox from the Peterson Institute warn that this could be a strategic move — creating a controversy to label Powell’s leadership as “mismanaged” and provide a reason to fire him.
Historical Echoes: Has This Happened Before?
This isn’t the first time a US president has clashed with the Fed. In the 1960s and 70s, Presidents Lyndon B. Johnson and Richard Nixon both pressured their Fed chairs to keep interest rates low — a move that some historians say led to the high inflation crisis of the mid-70s.
Experts warn that tampering with central bank independence for short-term political gain can cause long-term economic pain.
Market Fears: What If Powell Is Removed?
Just rumors of Powell’s potential removal have already spooked the markets. After Trump reportedly asked Republican lawmakers whether he should fire Powell, the S&P 500 briefly dropped by 0.7%, and the dollar dipped nearly 1%. Though the markets bounced back after Trump walked back his comments, the episode rattled investor confidence.
If Powell were actually removed, it could trigger a far more severe reaction. Experts predict a weakened dollar, rising long-term interest rates, and a significant loss of trust in the Federal Reserve’s independence — something that has underpinned the US economy for decades.
Why Trump Might Hold Off
Despite all the bluster, analysts believe Trump might ultimately keep Powell in place — at least for now. Powell’s term ends in May next year, and until then, Trump can use him as a scapegoat for any negative economic developments. Some also argue that Trump, as a businessman, values a strong stock market — and removing Powell could spark chaos on Wall Street, something he may want to avoid.
Final Thought:
As this battle between politics and monetary policy continues, one thing is clear: the independence of the Federal Reserve — a cornerstone of economic stability — is being tested like never before.
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