U.S. President Donald Trump on Thursday reiterated his claim that he could dismiss Federal Reserve (Fed) Chair Jerome Powell if he wanted to, once again attacking the central bank chief for not cutting interest rates.
Trump’s renewal of a threat from his first term could cause a major legal showdown over the issue of the American central bank’s longstanding political independence.
“He’ll leave if I ask him to, he’ll be out of there,” Trump said in the Oval Office while taking questions from reporters alongside Italian Prime Minister Giorgia Meloni. “I’m not happy with him. I let him know it and if I want him out, he’ll be out of there real fast, believe me.”
Powell has repeatedly said he intends to serve the full remainder of his term as chair, which expires in May 2026, and has also said he would refuse to step aside if asked by Trump.
Trump’s comments followed a posting on his social media site in which he called on Powell to cut the Fed’s short-term interest rate. “Powell’s termination cannot come fast enough!” he wrote on Truth Social.
The Republican president’s attacks come as the Supreme Court is considering a case that could make it easier for presidents to fire the heads of independent agencies such as the Fed.
Powell has steadfastly maintained that the Fed is independent from politics, a stance that Fed chairs have zealously guarded since at least the 1970s. Back then, the Fed was widely seen as worsening a 15-year run of high inflation by giving in to demands from then-President Richard Nixon to keep interest rates low in the run-up to the 1972 election.
Economic research has suggested an independent central bank is more likely to keep inflation in check, because it is more willing to do unpopular things to fight rising prices, such as lift interest rates. Wall Street investors also largely prefer an independent Fed, though the stock market did not appear to react to Trump’s comments.
Powell, in remarks at the Economic Club of Chicago on Wednesday, said the Fed’s “independence is very widely understood and supported in Washington and in Congress where it really matters.”
He said the Fed will base its decisions solely on what’s best for all Americans. “That’s the only thing we’re ever going to do,” Powell said. “We’re never going to be influenced by any political pressure.”
“Our independence is a matter of law,” Powell added. “We’re not removable except for cause. We serve very long terms, seemingly endless terms.”
‘Playing politics’
Trump said that inflation is falling and complained that interest rates are still rising “because we have a Federal Reserve chairman that is playing politics.”
Trump’s broadsides come a day after Powell signaled that the Fed will keep its key interest rate unchanged while it seeks “greater clarity” on the impact of policy changes in areas such as immigration, taxation, regulation and tariffs.
Trump and members of his economic team have said they would like longer-term interest rates to fall, which would make it cheaper for Americans to borrow to buy homes, cars and appliances. Yet the Fed controls a short-term rate and can only indirectly affect longer-term borrowing costs, which rose after Trump announced sweeping tariffs.
Powell also reiterated that Trump’s tariffs would likely raise inflation and slow the economy, which could make it harder for the Fed to cut rates anytime soon. And the Fed chair suggested that the central bank will focus on fighting inflation in the wake of the tariffs, even if the duties did weaken the economy. Powell’s comments contributed to a drop in stock prices Wednesday.
Referring to the European Central Bank, Trump on Thursday said Powell “should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now.”
The European Central Bank on Thursday lowered its key interest rate from 2.5% to 2.25%.
The Fed did act in tandem with other central banks last year as inflation eased globally and it lowered the U.S. benchmark policy rate a full percentage point at three successive meetings.
But progress on returning inflation to the Fed’s 2% target stalled through the fall, prompting policymakers to pause further cuts until it was clear price pressures would begin easing again, a finding confounded since Trump’s Jan. 20 inauguration and the policy shifts that followed.
The Fed’s benchmark interest rate is currently 4.25%-4.50%, where it has been since December.
Powell was initially nominated by Trump in 2017, and he was appointed to another four-year term by President Joe Biden in 2022. At a November news conference, Powell indicated he would not step down if Trump asked him to resign.
He has also said that the removal or demotion of top Fed officials was “not permitted under the law.”
Private talks to fire Powell
Trump has privately discussed firing Powell for months and talked about it with former Fed Governor Kevin Warsh, the Wall Street Journal reported on Thursday. That included the possibility of then selecting Warsh as Powell’s replacement.
Warsh has advised against trying to fire Powell, arguing that Trump should let the Fed chair complete his term without interference, the Journal reported, citing unnamed people familiar with the matter.
Warsh served as a Fed governor from February 2006 to April 2011. He was appointed by President George W. Bush.
The Journal said the discussions with Warsh took place at Trump’s Mar-a-Lago estate in Florida in February, but others close to the president had discussed the matter as recently as March.
Any attempt to fire Powell would likely be challenged all the way to the Supreme Court. The Federal Reserve Act of 1913 stipulates that Fed leaders may only be dismissed “for cause.”
Sen. Elizabeth Warren, D-Mass., warned Thursday that U.S. markets will “crash” if Powell can be fired by Trump.
A former Democratic presidential candidate, Warren has been a frequent Powell critic.
“I have tangled with [Powell] on a regular basis about both regulations and interest rates,” she told CNBC’s “Squawk on the Street.”
“But understand this: If Chairman Powell can be fired by the president of the United States, it will crash markets in the United States,” Warren noted.
Trump’s comments come with the backdrop of a legal case at the Supreme Court that stems from Trump’s firings of officials from two independent agencies. The Supreme Court last week let the firings stand while it considers the case. It could issue a broader ruling this summer that would enable the president to fire Fed officials, including the chair.
Powell said the central bank is watching the case closely, adding that it might not apply to the Fed. Lawyers for the Trump administration have also argued that allowing the president to fire the two officials wouldn’t erode the Fed’s independence.
In a 2024 mid-campaign interview with Bloomberg News, Trump said he would allow Powell to serve out his term as chair.
Earlier this month, Trump’s top economic adviser, Kevin Hassett, said in a television interview that “there’s not going to be any political coercion over the Fed, for sure.”
Powell started Trump’s second term in a relatively secure spot with a low unemployment rate and inflation progressing closer to the Fed’s 2% target, conditions that could have spared the central banker from the president’s vitriol.
But Trump’s aggressive and haphazard tariffs have increased the threat of a recession with both higher inflationary pressures and slower growth, a tough spot for Powell, whose mandate is to stabilize prices and maximize employment. With the economy weakening because of Trump’s choices, the president appears to be looking to pin the blame on Powell.
Trump has unleashed a rash of tariffs that have put the U.S. economy and the Fed in an increasingly perilous spot. On April 2, the president rolled out aggressive tariff hikes based off U.S. trade deficits with other nations, causing a financial market backlash that almost immediately led him to announce a 90-day pause. But Trump increased his tariff hikes on China to a rate of 145%, in addition to his existing tariffs on Canada, Mexico, autos and steel and aluminum.
Wall Street banks such as Goldman Sachs have raised their odds that a recession could start. Consumers are increasingly pessimistic in surveys about their job prospects and fearful that inflation will shoot up as the cost of the import taxes get passed along to them.
The Budget Lab at Yale University estimated that the increased inflationary pressures from the tariffs would be equal to the loss of $4,900 in an average U.S. household.
