President Donald Trump attacked Federal Reserve Chair Jerome Powell on Thursday for not cutting interest rates and said he could fire him if he wanted to, renewing a threat from his first term that could cause a major legal showdown over the issue of the central bank’s long-standing political independence.
“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. “I’m not happy with him.”
Trump’s comments followed a posting on his social media site in which the Republican president called on Powell to lower the Fed’s short-term interest rate and said, “Powell’s termination cannot come fast enough!” The Fed chair’s term ends in May 2026.
Powell was initially nominated by Trump in 2017 and was appointed to another four-year term by Democratic President Joe Biden in 2022. At a November news conference, Powell indicated he would not step down if Trump asked him to resign and in remarks Wednesday, made clear that “our independence is a matter of law.” He added: “We’re not removable except for cause. We serve very long terms, seemingly endless terms.”
Trump’s criticism stems from his view that, as he said Thursday, “we have essentially no inflation.” The Fed sharply raised rates in 2022 and 2023 to slow borrowing and spending and tame inflation, which dropped steadily from a peak of 9.1% in 2022 to 2.4% last month. Inflation is not far from the Fed’s target of 2%. The Fed even cut rates three times at the end of last year.
But since then, Powell and most other Fed policymakers have underscored that they are keeping rates on hold because of the uncertainty created by Trump’s sweeping tariffs, including a 10% tax on all imports and a 145% levy on imports from China.
In remarks Wednesday in Chicago, Powell reiterated that the Fed was waiting for greater clarity before making any moves and said the tariffs would likely worsen inflation.
Powell has steadfastly maintained that the Fed is independent from politics, a stance that Fed chairs have stressed since at least the 1970s. Back then, the Fed was widely seen as worsening a 15-year run of high inflation by giving in to demands from President Richard Nixon to keep interest rates low in the run-up to the 1972 election.
Economic research has suggested an independent central bank is more likely to keep inflation in check because it is more willing to do unpopular things, such as lift interest rates, to fight rising prices. Wall Street investors also largely prefer an independent Fed, though the stock market did not appear to react to Trump’s comments.
Powell said Wednesday that the Fed will base its decisions solely on what’s best for all Americans.
“That’s the only thing we’re ever going to do,” Powell said. “We’re never going to be influenced by any political pressure.”
He also suggested that the central bank will focus on fighting inflation in the wake of the tariffs, which would likely mean they would keep rates elevated.
Trump complained that interest rates are still rising “because we have a Federal Reserve chairman that is playing politics.” Yet longer-term rates rose after Trump announced his trade penalties.
Trump and members of his economic team have said they would like longer-term interest rates to fall, which would make it cheaper for Americans to borrow to buy homes, cars and appliances. Yet the Fed controls a short-term rate and can only indirectly affect longer-term borrowing costs.
A case before the Supreme Court could make it easier for a president to fire top officials, such as the Fed chair, at independent agencies. At issue are two Trump firings, which the justice have let stand while they consider the case.
Powell said he is watching the case closely but that it might not apply to the Fed, given that the court has in the past carved out exemptions for the central bank. Lawyers for the Trump administration, seeking to narrow the focus of the case, have also argued that it does not involve the Fed.
In a 2024 campaign interview with Bloomberg News, Trump said he would allow Powell to serve out his term as chair. Earlier this month, Trump’s top economic adviser, Kevin Hassett, said in a television interview that “there’s not going to be any political coercion over the Fed, for sure.”
Powell started Trump’s second term in a relatively secure spot with a low unemployment rate and inflation progressing closer to the Fed’s 2% target, conditions that could have spared him from the president’s criticism.
But Trump’s tariffs have increased the threat of a recession with higher inflationary pressures and slower growth, a tough spot for Powell, whose mandate is to stabilize prices and maximize employment. With the economy weakening because of Trump’s moves, the president appears to be looking to pin the blame on Powell.
On April 2, Trump rolled out increased tariff hikes based off U.S. trade deficits with other nations, causing a financial market backlash that almost immediately led him to announce a 90-day pause.
Wall Street banks such as Goldman Sachs have raised their odds that a recession could start. Consumers are increasingly pessimistic in surveys about their job prospects and fearful that inflation will shoot up as the cost of the import taxes get passed along to them.
The Budget Lab at Yale University estimated that the increased inflationary pressures from the tariffs would be equal to the loss of $4,900 in an average U.S. household.
