The ongoing dispute between former President Donald Trump and Federal Reserve Chair Jerome Powell has escalated, with Trump publicly demanding that the Federal Reserve’s board of governors strip Powell of his authority. This dramatic call underscores a persistent ideological clash over the direction of American economic policy and the independence of the nation’s central bank.
Donald Trump has consistently criticized Jerome Powell for his refusal to significantly lower interest rates, viewing such cuts as essential for stronger economic growth and reduced government and homeowner debt servicing costs. Trump, utilizing his Truth Social platform, labeled Powell “stubborn” and argued that if the Fed Chair doesn’t act, the board should “assume control” to implement the necessary rate adjustments.
Conversely, Federal Reserve officials, including Powell, have steadfastly maintained their independence from political pressure, asserting that their decisions are guided by a dual mandate: stabilizing prices and maximizing employment. Powell has kept the benchmark interest rates constant this year, citing the need to assess the impact of Trump’s tariffs on inflation before making further adjustments.
Economists and Fed officials largely concur that a robust US economy necessitates relatively high interest rates to prevent overheating and inflationary surges. While the Fed’s preferred measure of inflation slightly exceeds its 2% target at 2.6%, Trump controversially claims there is virtually no inflation, advocating for drastic cuts.
The former president has pushed for a substantial 3 percentage point cut to the Fed’s benchmark rate. However, financial experts caution that such a significant rate reduction could inject an unmanageable amount of money into the US economy, potentially leading to an acceleration of inflation rather than controlled growth.
This latest demand is part of Trump’s broader campaign against Powell, which has included calls for his resignation and accusations of a “terrible job.” While the Supreme Court has indicated that a president cannot fire the Federal Reserve chair merely for policy disagreements, removal is legally possible “for cause,” such as misconduct or dereliction of duty.
Adding another layer to the contention, Donald Trump has more recently accused Jerome Powell of mismanaging the U.S. central bank’s substantial $2.5 billion renovation project, diversifying the grounds for his public attacks beyond interest rates alone.
The ongoing struggle between the former president and the head of the Federal Reserve highlights fundamental disagreements on monetary policy and the critical balance between political influence and central bank autonomy. The implications of this power struggle are profound for the stability and future direction of the US economy.
