Former President Donald Trump has returned to calling for the firing of Federal Reserve Chair Jerome Powell. Powell’s second term is set to expire in May of next year. Trump has lashed out at Powell over and over for raising interest rates. To date, he said that he’s “not planning on doing anything” to recall him right now.
In 2017, then President Trump nominated Jerome Powell to take the helm at the Fed. He replaced Janet Yellen, who had been appointed by Barack Obama. Since then, Trump has continued to intensify the pressure he’s putting on Powell. He’s calling on the Fed to cut interest rates to address the threat of increasing inflation. Trump has labeled Powell a “knucklehead” and has voiced dissatisfaction with the central bank’s performance, claiming that Powell is “doing a lousy job.”
Powell, in reaction to Trump’s ire, defends the Fed’s independence as essential for sound monetary policy. He has rejected the idea that Trump has the power to remove him just for disagreeing on policy grounds. While White House officials have refused to discuss Powell’s ouster, they have suggested that he could be impeached for cause if needed.
The Federal Reserve has a serious long-term commitment to stable prices. In fact, just this week, Powell warned not to jump to conclusions, amid concerns that tariffs might exacerbate inflation. The key interest rate is currently floating at about 4.3%, a significant decline from this same time in 2022. This appointment is particularly important, as the current Fed Chair can only serve as a governor until 2028. This move greatly extends his ability to shape monetary policy beyond when his term formally ends.
Now, for the first time in recent memory, Trump’s allies have created a favorable environment for attacking Powell. They’ve previously alleged that he has mismanaged the renovation of Federal Reserve properties, adding to the heat and embarrassment under his leadership. As debates over Powell’s future intensify, speculation is flying. Politically savvy people are already speculating about his potential successors should Trump decide to jump ship.
In their stead, Stephanie Bessent and Kevin Hassett have surfaced as possible replacements to take over when Powell leaves. Hassett has been confirmed to be the head of Trump’s National Economic Council. Conservative economist Kevin Warsh is considered a viable option should Trump opt for a new direction at the helm of the Fed.
Here’s how Jamie Dimon, chief executive of JP Morgan Chase, assessed the situation. Bullard warned against Trump’s preferred method of calling out Powell. He has referred to this kind of coordination as “working the refs.” He warned that these tactics could harden into a precedent that erodes the apparent autonomy of the Fed. He went further, underscoring the importance of this independence to ensuring a strong and effective monetary policy.
Talk about Powell’s doom and fate is rising. Other experts say such a move would send the financial markets into a tailspin and potentially tip the entire economy into crisis. Trump’s adversarial disposition towards technocracy and economic policy as a whole makes it difficult to predict what later scenarios could look like.