US President Donald Trump is known for his adversarial stances—targeting illegal immigration, challenging regulations on household appliances, and, notably, repeatedly clashing with the leader of the nation’s central bank.
Trump appointed Jerome Powell as Chair of the Federal Reserve in 2018, but their relationship quickly soured. Powell has faced sharp criticism, being denigrated on social media and facing speculation about whether the president intended to remove him from his post.
Powell’s situation has grown more tenuous over time.
As recession risks escalate, Trump has openly suggested dismissing the Fed chair, most recently posting on social media: “Powell’s termination cannot come fast enough!”
This comes as Trump continues efforts to expand presidential power, challenge judicial boundaries, and pressure political adversaries—raising concerns among observers that Trump is both intent on and increasingly able to influence the Fed’s independence, in contrast to his first term.
However, this week saw some reduction in tensions, as Trump, after a notable stock market decline cited by some as a response to his remarks, told reporters he never planned to fire Powell.
This followed a broader shift in tone as Trump’s economic policies—particularly trade tariffs—have faced mounting criticism from political and business leaders.
Still, Trump offered little indication he would refrain from commenting on monetary policy, reaffirming his right to voice concerns and suggesting he might personally speak with Powell about interest rates.
Donald Kohn, senior fellow at the Brookings Institution and former vice chair of the Federal Reserve, said Trump’s changed tone appeared designed to placate markets, but warned that any suggestion the conflict was resolved was premature.
“It’s a testament to the markets’ reaction,” Kohn said. “But it’s far too early to say things have stabilized.”
At the heart of the dispute are differences regarding the Fed’s key interest rate, a rate that influences borrowing costs for consumers and businesses across a range of loans.
Lower rates typically spur borrowing and economic activity, while higher rates curb demand and help keep prices stable.
Trump, with decades of experience as a real estate developer, has long favored low interest rates.
He opposed rate hikes during his first term and is now pressing Powell for cuts, arguing inflation has moderated and that keeping rates high would be unnecessarily harmful.
“There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump wrote earlier this week, referring to Powell.
Trump is not the first leader to blame the central bank during economic uncertainty or to advocate for easier monetary policy.
Nor is he alone in questioning Powell, whose earlier characterization of post-pandemic inflation as “transitory” has drawn criticism, as has his perceived reliance on lagging data.
Nonetheless, Trump’s direct pressure contravenes the modern tradition of presidential restraint regarding the Federal Reserve.
The current dynamics draw historical parallels to Richard Nixon, who pressured his Fed chair to adopt looser policies ahead of the 1972 election—a move later blamed for fueling the “stagflation” of the 1970s.
Economists warn that greater presidential sway over the Fed could have dire consequences, citing history’s many examples where political influence undermined monetary stability and contributed to economic crisis.
Sarah Binder, professor at George Washington University and Federal Reserve scholar, emphasized that faith in Fed independence is critical to market expectations about inflation.
Binder cautioned that undermined perceptions could lead to higher borrowing costs, as investors demand greater returns, and that any future rate cuts could be viewed through the lens of presidential pressure—regardless of the actual motivation.
“Ultimately, the issue is about the perception of independence, and the dangers posed by attacks on that perception raise doubts about the Fed’s ability to act as robustly as central bankers believe is necessary,” she said.
Joe Lavorgna, chief economist at SMBC Nikko Securities and former National Economic Council member during Trump’s presidency, defended the president’s positions, framing them as a “classic macroeconomic critique.”
“I fully agree with the president’s view that the Fed has a history of reacting too late,” Lavorgna said, adding that recent stock market declines are more closely tied to uncertainty over trade policy.
Lavorgna expressed confidence that Fed officials would respond to market forces more than presidential pressure, and speculated that Trump’s criticism might even make the Fed more cautious about lowering rates, to avoid any perception of being influenced.
“At the end of the day, the Fed will do what’s prudent,” he said. “What remains uncertain is the timing.”
Powell, a seasoned Washington attorney whose term as chair is set to end next year, has insisted that he is unaffected by White House criticism and that the president lacks the legal authority to dismiss him.
The legal clarity of Powell’s position, however, remains debated.
Though statute states that Fed governors can be removed only for cause, it is unresolved whether these safeguards extend to the chairmanship itself.
Meanwhile, the administration has taken steps to curtail the Fed’s regulatory reach, and is pursuing broader legal action to expand executive power over independent agencies whose leaders are shielded by “for cause” protections.
Mark Spindel, chief investment officer at Potomac River Capital and coauthor with Prof. Binder on Federal Reserve studies, pointed out that the notion of Fed “independence” has evolved—often in response to political and economic upheaval.
“What’s given can be taken away,” Spindel remarked, just before Trump appeared to soften his stance.
When contacted days later, Spindel offered a brief assessment: “Damage done.”
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