Treatment. But that tradition is facing a new tension when President Donald Trump continuously attacked President Jerome Powell.
“If I want him to leave, he will leave very quickly, believe me,” US President Donald Trump told reporters on April 17 at the Oval Office. On his social media platform, Truth Social, Mr. Trump continued to pressure: “The firing of Powell cannot come quickly!”, He wrote.
These threats highlighted Trump’s efforts to weaken the political independence of an organization that was not affected by the White House to ensure stable economic management responsibility. Speaking at the Chicago Economic Club on April 16, Fed President Jerome Powell oppose political intervention and said the Fed will make a decision based on what is best for Americans.
“That is the only thing we will do,” Mr. Powell said. “We will never be influenced by any political pressure … Our independence is a legal matter.” He added that the Fed leadership “could not be dismissed unless there was a good reason” and that “we serve in the long term, seemingly endless”.
However, that did not prevent Mr. Trump trying to dismiss the Fed President. “I don’t think he is doing his job well,” the president said on May 17, declaring that Mr. Powell reduced the interest rate “too late”.
Powell was first nominated by Trump as the head of the Fed in 2017 and was nominated by President Joe Biden in 2022. His current term as the Fed President lasted until May 2026.
Although the presidents have previously expressed disappointment about the Fed because of conflict interest rates with their policy goals, Mr. Trump’s words have raised new concerns about political intervention in monetary policy, a development that can make the market panic and weaken the reputation of the US central bank.
“The Fed needs public trust,” said Sarah Binder, an Fed and a senior member at the Brookings Institute. “But if the president tries to eliminate Mr. Powell from his position, it will only increase the instability and the market will not be happy.”
So what is the President’s power limit to the Fed?
Can Mr. Trump fired Mr. Powell?
Legally, the answer is very complicated and has not been verified. No Fed president has been dismissed.
The Federal Reserve Act allows the dismissal of the Board of Directors, including the president, “for plausible reasons”. But traditionally, this plausible reason is understood as misconduct or incompetent, not policy disagreements. Binder said, “the court often does not consider disagreements about the set of interest rates as a ‘good reason’.
Although Mr. Trump and his allies have stated his ability to fire Powell since his first term, but they have not yet done it, maybe due to the uncertain legal situation and the political consequences of that action.
Powell himself made it clear that he would not leave in silence. When asked in November last year whether he resigned if Mr. Trump asked or not, he answered briefly “no”.
However, the Trump administration seems to be a basis for a potential confrontation. Finance Minister Scott Bessent recently told Bloomberg that he would start interviewing people who could replace Mr. Powell this fall.
Trump’s Fed President’s efforts took place when the Supreme Court was considering a case regarding the right to dismiss high -ranking officials at the President’s independent agencies. Although the case is related to the National Labor Relations Department and the Public Protection Committee, their impact is broader.
If the Court is on the Trump administration, this will be a signal of how they will resolve the desire to dismiss the Fed President of Mr. Trump, although the Fed has stated that they do not believe that the result can be applied to them.
In 1935, the US Supreme Court made a decision to limit the president’s ability to dismiss the leaders of independent agencies without reason. This ruling has long been protected by Fed presidents from being fired due to political pressure, but this may soon be challenged by the Supreme Court.
Impact on the US economy
Mr. Trump blamed Mr. Powell for not acting strong enough to support economic growth, saying that the Fed President was “playing political game” by keeping interest rates.
But central banks – and many economists – the opposite argument: that the independent Fed is essential to manage inflation and manage the economy, and the concessions to political requirements can harm the economy and global beliefs in American institutions.
Powell still asserts that the decisions of the Fed “are based on what is best for all Americans”. In his speech on April 15, he warned that Mr. Trump’s comprehensive tariff could push the US economy into a “challenging scenario”, with higher inflation and slow growth – the conditions that complicated Fed’s double dual mission were stabilizing prices and maximizing jobs.
Mr. Trump’s tariffs have increased many imported items, tightened the household budget and spread the fear of the decline caused by policies when inflation was still 2% higher than the target that the Fed set.
Meanwhile, Mr. Trump asked to cut interest rates immediately, leading the European Central Bank (ECB) to cut interest rates on Thursday.
