Jerome Powell, the current Chair of the Federal Reserve, is reportedly under threat of dismissal. President Donald Trump has allegedly leaked to GOP congressmen that he plans to fire Powell. On Tuesday night, Trump invited party leaders into the Oval Office. So before he announced his boldest move, he sought their stamp of approval. Powell photo courtesy of Federal Reserve District 8 Powell was first appointed by Trump in November 2018. He replaced Janet Yellen, who was named Treasury Secretary under President Joe Biden after serving as Fed Chair herself for four years.
The relationship between Trump and Powell has been rocky indeed, especially over the central bank’s benchmark borrowing rate. Trump and other White House officials have ascetically cornered Powell to lower interest rates, which have cooled the economy. Yet they claim that these abominably low rates sap economic development. Just last week, Trump took to Twitter to express his displeasure with Powell’s actions. He reiterated that the Fed’s extraordinarily accommodative monetary policies are inconsistent with his administration’s economic policy objectives.
Former Fed Chair Janet Yellen’s tenure was marked by a focus on stabilizing the economy after the 2008 financial crisis. Following her exit, Powell stepped in and has, even as the economic situation has worsened, tried to fight inflation. He was criticized by Trump for moving too slowly to tighten monetary policy. As a presidential candidate, it’s a significant turnaround for Trump to back bipartisan crypto legislation. He seeks to encourage innovation in the financial sector but has run into stiff opposition from some Republican factions.
Trump’s dissatisfaction extends beyond monetary policy. Republican lawmakers have repeatedly blocked votes on the President’s favored cryptocurrency legislation, deepening divisions in the party. Opponents have sharpened their rhetorical blades against Powell. Curiously, some Republicans are singling him out for particular blame over Old Dominion mismanagement—including inappropriately lavish renovations to the Federal Reserve’s headquarters in Washington, D.C.
Recognizing the increasing public anger, Rep. Anna Paulina Luna, a Republican from Florida, started making noise on social media. Her comments hinted that a challenge to Powell was in the works. Luna stated that she is “99% sure” Powell’s firing is next. Trump is serious about punishing Powell. In the face of this threat, Fed Chair has been clear that his ouster “is not allowed under the law,” underscoring his commitment to protecting monetary policy independence.
This political maneuvering on all fronts raises some very important questions. What does this portend for the future leadership of the Federal Reserve and the very direction of our national economic policy? Just as radically, and perhaps more importantly, Trump’s administration aimed to shove the Overton Window in the opposite direction. The possible firing of Powell would be a highly consequential third break from U.S. government tradition and practice.