Meanwhile last week, former President Donald Trump cranked up his demand that the Fed lower interest rates. In addition, he made the case against current chair Jerome Powell for failing to steer the economy in the right direction. Trump claimed that if Powell knew anything about monetary policy, interest rates would be 100 basis points lower. The Federal Open Market Committee’s target federal funds rate has been held between 4.25% and 4.5%. This range has been unchanged since December.
In a recent Truth Social post, Trump declared, “Powell’s firing could not be more overdue.” This seemingly offhand comment reveals the depth of his ire at Powell’s command over the Federal Reserve. President Trump has long advocated for lower interest rates in order to spur economic growth. He points to recent declines in prices as proof bolstering his case.
Trump’s relationship with Powell has become increasingly contentious, particularly regarding the implications of Trump’s tariff policies. Furthermore, Powell cautioned that these tariffs would increase inflation in the near term. That might make it more difficult for the central bank to achieve their congressionally mandated dual goals of high employment and price stability.
“We may find ourselves in the challenging scenario in which our dual-mandate goals are in tension,” both Trump and Powell echoed, highlighting the current economic challenges. Even the greatest Fed leader will face monumental challenges in realizing policy tradeoffs in pursuit of inflation and employment aims, as Powell’s statement highlights.
Here’s Senator Elizabeth Warren condemning the entire sordid affair. She had cautioned Trump that firing Powell would bring calamitous results to the U.S. markets if Trump were to win. She cautioned, “If the president of the United States fires Chairman Powell, it will crash the markets.”
Trump’s pressure, in other words, is laying the ground for Powell to continue to resist. He plans to remain in this position until the end of his term in May 2026. He’s done a good job of communicating that, unlike his predecessors, he can’t be removed from office under current law.
Kevin Hassett, a former economic advisor to Trump, indicated that the president’s team would continue to evaluate the feasibility of removing Powell from his role. He remarked, “The president and his team will continue to study that matter,” signaling that discussions around Powell’s future are ongoing.