Trump Intensifies Criticism of Fed Chair Powell, Calls for Rate Cuts and Departure

On Thursday, former President Trump criticized Federal Reserve Chair Jerome Powell on social media, stating that Powell should be lowering interest rates and that his departure was desired. These comments followed a speech by Powell the previous day, where he discussed the potential negative impacts of the Trump administration's trade policies while also indicating the central bank's intention to maintain current interest rates.

The Federal Reserve has refrained from cutting interest rates this year due to persistent inflation, which has remained above its target growth rate of 2% annually. Meanwhile, Trump has implemented tariffs on major trading partners, a move that economists suggest could lead to renewed inflation. Powell highlighted these risks, noting that the tariffs could create a "challenging scenario" for the U.S., requiring management of both rising inflation and a slowing economy. This situation is often referred to as "stagflation," a combination of economic stagnation and inflation.

In his social media post, Trump referenced the European Central Bank, which had recently lowered rates. He wrote that Powell was "too late" and criticized his recent report as a "mess." Trump argued that with falling oil and grocery prices, and the U.S. benefiting from tariffs, Powell should have lowered interest rates. He concluded by reiterating his desire for Powell's removal.

A 1935 Supreme Court ruling affirmed Congress's authority to establish independent federal agencies, whose board members could only be removed before their terms expired "for cause." The court emphasized the importance of maintaining each branch of government free from the influence of the others.

Following his election, Trump had previously criticized Powell's performance. Powell has stated he would not resign if asked by the president and has noted that presidents are legally restricted from firing or demoting the Fed chair. In a meeting with the Italian Prime Minister, Trump said that Powell would leave if asked. Trump nominated Powell to lead the Fed in 2017, and President Biden re-nominated him in 2021. Powell's term as Fed chair is scheduled to end on May 15, 2026.

Powell has consistently defended the central bank's independence, stating that it benefits all Americans by allowing the Fed to make decisions based on economic data, free from political influence.

The extent to which the White House will respect the Fed's independence remains uncertain. Trump has a history of challenging political norms. An analyst noted that Trump recently removed two Democrats from the board of another financial regulator, the National Credit Union Administration. The White House also dismissed two Democratic members of the Federal Trade Commission. The analyst suggested that this could be a step towards justifying the removal of Democrats on the Federal Reserve Board, potentially establishing the precedent of presidential discretion over financial regulators.