- President Donald Trump appointed Jerome Powell to lead the Federal Reserve in 2017.
- Trump's relation with Powell eroded shortly after the president became unhappy with Fed policy direction.
- While praising the Fed's early response to pandemic impacts, Trump has renewed his criticism of Powell.
President Donald Trump renewed his attacks on the Federal Reserve earlier this week, demanding the monetary body cut interest rates and berating Fed chairman Jerome Powell.
His comments are just the latest in a pitched battle that tracks back to the president’s first term in office.
“Preemptive Cuts” in Interest Rates are being called for by many. With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other “things” trending down, there is virtually No Inflation,“ Trump wrote in a Monday posting to Truth Social.
”With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already “lowered” seven times. Powell has always been ‘To(o) Late,’ except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?"
What’s the long-running Trump vs. Fed beef all about?
Interestingly, Trump provided the gateway to Powell’s leadership position at the Fed, thanks to a 2017 presidential appointment that flew through the Senate Banking Committee on a 22-1 vote and was confirmed by the full Senate in early 2018.
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.
Though Trump and Powell appeared to have a collegial relationship in the early days of Powell’s first term as Fed chair, that relationship eroded thanks to Trump’s displeasure with the Fed’s policy direction which, at the time, included addressing an overheated U.S. economy by raising interest rates.
Amid stock market declines and a wave of layoffs in late 2018, Trump told the Washington Post he was “not even a little bit happy with my selection of Jay” and that he thought the Fed was “way off base” with their policy direction.
“I’m doing deals, and I’m not being accommodated by the Fed,” Trump told the Post for a report published in November 2018. “They’re making a mistake because I have a gut, and my gut tells me more sometimes than anybody else’s brain can ever tell me.”
Less than a year later, the Fed was in interest rate cutting mode and, again, Trump was publicizing his displeasure with U.S. central bank policy in general, and Powell in specific, but this time it was about interest rate reductions not moving fast enough.
Following the Fed’s decision during a September 2019 policy meeting to cut its intrabank overnight lending rate by a quarter of a percentage point, to a range of 1.75%-2%, Trump shared what he thought of the decision in a social media post.
“Jay Powell and the Federal Reserve Fail Again,” Trump tweeted. “No ‘guts,’ no sense, no vision.”
Trump reverses position — for a moment
Just six months later, the onset of the COVID-19 pandemic would send U.S. and global economies into a tail spin. Powell’s actions early on in the public health crisis, which included unprecedented policy moves aimed at bolstering the fiscal crisis, earned widespread, bipartisan praise, including from Trump who, according to a Bloomberg report at the time, told Fox News that he was “very happy with (Powell’s) performance” and that “over the last period of six months, he’s really stepped up to the plate”.
In a 2024 campaign interview, Trump told Bloomberg News he would allow Powell to serve out his term even though he criticized the Fed chair in stump speeches throughout the campaign.
In an NBC “Meet the Press” interview about a month after winning reelection, Trump told moderator Kristen Welker he did not have plans to order Powell to step down from his chairmanship.
“No, I don’t think so. I don’t see it,” the president-elect 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.”
Earlier, and just a day after the election last fall, when asked at a press event 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.
And the feud has just ratcheted up, albeit intermittently, since then.
Can Trump fire Powell?
Alongside his criticism of Fed policy decisions, Trump has signaled he believes he can remove Powell from the chairmanship and White House staffers have recently indicated an effort is under way to explore that possibility.
Last week, White House economic adviser Kevin Hassett told reporters that the option of firing Powell was 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 followed a series of missives Trump issued 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 on April 10. “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 that day, 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.”
On Tuesday, Trump swiveled yet again while fielding questions from reporters at the White House following a swearing in ceremony for new SEC Chairman Paul Atkins.
When asked about the prospects of firing Powell, the president said, “I don’t want to talk about that because I have no intention of firing him.”
While Trump has pilloried Powell and some of the Fed’s policy decisions, and threatened to fire him on numerous 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.
Tariffs prompt wait-and-see approach
For his part, Powell has refrained from responding to Trump’s criticism’s other than to clarify his opinion on whether a sitting president has the power to remove a Fed chairperson over policy disputes.
Speaking at an Economic Club of Chicago event last week, Powell signaled the Fed 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.
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.
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.