Trump Hints at Firing Federal Reserve Chair: Here's Why

On Thursday, President Donald Trump escalated his criticism of Federal Reserve Chairman Jerome Powell, condemning the central bank for not aggressively slashing interest rates. Amid rising tension over the country's monetary policy direction, Trump even hinted at the possibility of removing Powell, whose term does not end until next year.

The president's attacks followed Powell's remarks that pointed to the president's own trade policies, including widespread tariffs, as sources of market uncertainty, complicating the Federal Reserve's economic decision-making. "We are seeking greater clarity" on how changes in immigration, tax, regulation, and trade policies will impact the economy, Powell stated during a speech on Wednesday.

The impact was immediate: Powell's comments contributed to a significant drop in stock prices on Wall Street, reigniting fears of an economic slowdown.

Praise for Tariffs, Criticism for Powell

From his social media platforms, Trump reiterated his support for tariffs as an economic tool and criticized Powell for inaction. "Oil prices are going down, groceries (even eggs!) are decreasing, and the United States is getting RICHER WITH TARIFFS," he declared, adding that Powell "should have cut interest rates, like the ECB, long ago, but certainly should lower them now. The removal of Powell cannot come soon enough!"

His statements came on the same day the European Central Bank cut its key interest rate from 2.5% to 2.25%, a decision Trump used as a benchmark to push the Fed toward a similar path.

Powell's Defense: Fed's Independence Stands Firm

Jerome Powell, initially nominated by Trump in 2017 and confirmed for a second term by President Joe Biden in 2022, staunchly defended the central bank's independence. "We will never be influenced by any political pressure," he asserted during his speech at the Economic Club of Chicago.

"Our independence is a matter of law. We are not removable except for cause. We serve very long, seemingly endless terms. So we are protected by law," Powell continued, expressing confidence that Congress will not alter this structure, emphasizing bipartisan support for the institution's autonomy. In November, at a press conference, Powell also confirmed he would not resign if Trump requested it.

Market Concerns and Analyst Warnings

The criticisms from Trump and the potential for direct political interference in the Fed have raised alarms among economists and investors. "A sudden crystallization of the threat to the Fed's independence... would intensify market stress," warned Krishna Guha, an analyst at investment bank Evercore ISI, as quoted by the AP.

"If you liked the market debacle over tariffs, you'll love the stock selloff with the loss of Fed independence," he added. Experts suggest that a perception of a Fed pressured by the White House could undermine market confidence in the stability of monetary policy, amidst an already uncertain global situation.

Tariffs, Inflation, and an Economy Under Pressure

Trump has advocated a series of tariffs as part of his trade policy, including increases up to 145% on Chinese goods and additional tariffs on countries like Canada and Mexico, as well as sectors such as automobiles, steel, and aluminum.

Although the president claims these measures enrich the United States, their impact has been heavily debated. Banks like Goldman Sachs have raised the likelihood of a recession, while surveys indicate growing consumer pessimism. Many fear that tariff costs will be passed onto consumer prices, exacerbating inflation and weakening consumption.

The confrontation between Donald Trump and Jerome Powell signifies more than just a disagreement over interest rates. It represents a clash between a president seeking direct control over economic policy fronts and a central bank defending its autonomy as the guardian of the nation's financial stability.