- President Trump amped up criticism of the Federal Reserve and Chairman Jerome Powell.
- Trump says the monetary body should lower interest rates and suggested Powell needs to go.
- Most legal experts say the Fed's independence is protected by law.
President Donald Trump’s on-again, off-again displeasure with the policy direction of the U.S. Federal Reserve, discord that tracks back to his first term in office, has been back on the hot burner in recent days as the president has issued demands for immediate action on interest rates and the ouster of Fed Chairman Jerome Powell.
White House economic adviser Kevin Hassett told reporters Friday that the option of firing Powell is currently being explored.
“The president and his team will continue to study that matter,” Hassett said in response to a reporter’s question.
Hassett’s comments follow a series of missives issued by Trump this week claiming the Fed, which has taken a pause on interest rate adjustments since lowering rates in three successive times to end 2024, is behind the curve on making further reductions.
“The (European Central Bank) is expected to cut interest rates for the 7th time, and yet, “Too Late” Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete “mess!”,” Trump posted to Truth Social Thursday morning. “Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”
Later Thursday, Trump suggested he did have the power to remove Powell as chairman.
“If I want him out, he’ll be out of there real fast, believe me,” Trump said in the Oval Office while taking questions from reporters during a visit with Italian Prime Minister Giorgia Meloni, per a report from Associated Press. “I’m not happy with him.”
The criticism revisits issues Trump raised with Powell and the Fed during his first term of office, in spite of having appointed Powell in 2018.
What started the latest brouhaha over the Fed?
Trump appeared to be fired up by comments Powell made Wednesday during a talk at an Economic Club of Chicago event where the Fed chairman signaled the monetary body was prepared to wait to see how Trump policy changes, including new trade tariffs, would impact the U.S. economy before making further interest rate adjustments.
“Looking forward, the new administration is in the process of implementing substantial policy changes in four distinct areas: trade, immigration, fiscal policy and regulation. Those policies are still evolving, and their effects on the economy remain highly uncertain,” Powell said. “For the time being, we are well-positioned to wait for greater clarity before considering any adjustments to our policy stance.”
The Fed’s next policy meeting is slated for May 6-7.
Economists say the Fed is currently in a precarious position when it comes to policy direction as Trump’s tariff edicts are expected to push prices up on many consumer goods. There is also concern that the president’s policy changes could lead to stagflation conditions, where prices go up even as the overall economy experiences a slowdown. The Fed’s primary tool for addressing those issues is interest rate adjustments. Generally speaking, higher rates raise the cost of debt, slow the economy and reduce inflation. Lower rates reduce the cost of borrowing and boost the jobs sector.
Can Trump dump the Fed chair?
Powell, a Republican and former private equity executive, joined the Federal Reserve in 2012 and ascended to the chairmanship in 2018 via Trump’s appointment. President Joe Biden renewed Powell’s term in 2022, which runs through May 2026.
While Trump has pilloried Powell and some of the Fed’s policy decisions, and threatened to fire the current chairman on several occasions, legal experts generally agree that the U.S. president does not have the power to order personnel changes at the agency without cause. The courts have previously ruled that a difference of opinion on policy matters does not rise to that level.
Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. Federal lawmakers also structured the Fed to ensure that its monetary policy decisions focus on achieving that two-part mission outside the impacts of political pressures. To that end, the seven members of the Fed’s Board of Governors are appointed to staggered 14-year terms. One term begins every two years, on Feb. 1 of even-numbered years with openings filled via presidential appointment and subject to Senate approval. The board’s chairperson is appointed to a four-year term. Also, elected officials and members of the president’s administration are not allowed to serve on the Fed board.
Trump has repeatedly shared his opinion that he should have a say in the Fed’s interest rate decisions, in spite of the body’s congressionally mandated independence.
“I don’t think I should be allowed to order it, but I think I have the right to put in comments as to whether the interest rates should go up or down,” Trump said in an interview with Bloomberg News at the Economic Club of Chicago last October, per NBC News.
In a wide-ranging interview last December on NBC’s “Meet the Press,”, Trump, the president-elect at the time, softened his previous rhetoric aimed at Powell.
When asked by moderator Kristen Welker about whether he planned to ask or order Powell to step down from his chairmanship, Trump said, “I don’t.”
“No, I don’t think so. I don’t see it,” he said. “But, I don’t — I think if I told him to, he would. But if I asked him to, he probably wouldn’t. But if I told him to, he would.”
At a press conference last November, Powell was asked about whether he would step down from his chairmanship if asked by Trump. Powell responded “no” and later said a sitting president is “not permitted under the law” to order personnel changes at the Fed outside its congressionally dictated process.