Former President Donald Trump reignited his public feud with Federal Reserve Chair Jerome Powell this week, issuing a stark threat that sent tremors through financial markets.
“Powell’s termination cannot come fast enough!” Trump declared on social media, accusing the Fed leader of being “too late and wrong” in his approach to monetary policy.
The bitter confrontation stems from Trump’s frustration over interest rates, which he believes Powell should slash more aggressively.
Like a captain demanding his navigator change course in rough seas, Trump wants rates lowered to potentially boost the economy and, not coincidentally, his political fortunes.
What Trump seemingly overlooks, however, is the legal fortress surrounding Powell’s position.
The Federal Reserve Act, designed as a shield against political winds, specifies that governors can only be removed “for cause” – meaning misconduct or malfeasance, not policy disagreements.
This protection, reinforced by the Supreme Court’s 1930s Humphrey’s Executor ruling, creates a substantial barrier to presidential interference.
Powell himself has planted his flag firmly on this legal ground, stating he would refuse to resign if asked by Trump, insisting such a removal would violate established law.
The Fed Chair, originally appointed by Trump in 2018 and later reappointed by Biden, serves a term extending to May 2026.
Financial experts watch this clash with furrowed brows.
The independence of the Federal Reserve, a cornerstone of economic stability since the 1970s, hangs in the balance.
Treasury Secretary Bessent reportedly cautioned against firing Powell, warning it could destabilize already nervous markets.
The timing of Trump’s threat appears linked to Powell’s recent comments on inflation concerns and the “challenging scenario” posed by potential tariffs.
Trump recently claimed the U.S. is already seeing benefits from tariffs with lower oil prices despite Powell’s warnings.
A pending Supreme Court case reviewing past Trump firings could have implications for the Fed’s structure, though Powell believes it may not apply to the Federal Reserve.
Like two boxers circling in different rings, Trump points to the European Central Bank’s rate cuts while Powell remains focused on his dual mandate of stable prices and maximum employment.
The collision course seems set, with markets bracing for potential turbulence if this institutional tug-of-war intensifies further.
