- President Donald Trump demanded Federal Reserve Chairman Jerome Powell’s “termination” and urged immediate interest rate cuts, criticizing Powell’s recent report as a “mess” in a Thursday Truth Social post.
- Trump contrasted Powell’s inaction with the European Central Bank’s expected seventh rate cut, citing falling oil and grocery prices and tariff-driven economic gains as justification for lower U.S. rates.
- Powell’s Chicago speech, which noted tariffs’ impact on inflation and growth and contributed to a Wednesday market sell-off, underscored the Fed’s cautious approach, despite Trump’s ongoing pressure and legal limits on his ability to fire Powell.
President Donald Trump’s escalating rhetoric against Federal Reserve Chairman Jerome Powell took a sharp turn on Thursday, as he publicly called for Powell’s “termination” while urging immediate interest rate cuts. In a post on Truth Social, Trump criticized Powell’s leadership, labeling his recent report a “complete mess” and accusing him of being consistently “too late and wrong” on monetary policy. The attack follows Powell’s speech at the Economic Club of Chicago, where he addressed the complex interplay between the administration’s tariffs and the Fed’s dual mandate of controlling inflation and fostering economic growth. Trump’s comments, coupled with his reference to a steep market sell-off on Wednesday, underscore the growing tension between the White House and the central bank, a dynamic that could shape economic policy and market sentiment in the months ahead.
Trump’s post highlighted the European Central Bank’s (ECB) expected decision to cut interest rates for the seventh time, framing it as a proactive move to stimulate growth in contrast to Powell’s perceived inaction. The ECB’s strategy reflects broader challenges in the Eurozone, where sluggish economic activity and low inflation have prompted a series of rate reductions to encourage borrowing and investment. Trump argued that Powell should follow suit, pointing to falling oil prices, declining grocery costs (including eggs), and the economic benefits of tariffs as evidence of a strengthening U.S. economy that could withstand lower rates. His claim that the U.S. is “getting rich on tariffs” aligns with the administration’s “Liberation Day” tariff announcement on April 2, which introduced new trade measures aimed at protecting domestic industries but has sparked concerns about inflationary pressures.
Powell’s remarks in Chicago provided context for the Fed’s cautious stance. He noted that tariffs complicate the central bank’s decision-making, as they could exacerbate inflation while simultaneously affecting growth. Powell emphasized that the Fed would evaluate the economy’s distance from its inflation and growth targets and consider the time horizons for closing those gaps. These comments, which hinted at the Fed’s reluctance to cut rates hastily, contributed to Wednesday’s market downturn, as investors interpreted them as a signal of prolonged restrictive policy. The Fed’s current approach reflects its ongoing effort to balance inflation, which has moderated but remains above the 2% target, against the risk of slowing economic momentum, particularly in labor markets.
Trump’s call for Powell’s firing marks a new level of hostility in their ongoing feud. On April 4, Trump had previously urged Powell to cut rates, suggesting it would be a “perfect time” to improve his image as a decisive leader. However, Thursday’s post was the first to explicitly demand Powell’s removal, a move Powell has publicly stated is “not permitted under the law.” The Federal Reserve’s independence, enshrined in its structure, is designed to insulate monetary policy from political pressures, ensuring decisions are based on economic data rather than electoral or partisan considerations. Powell’s tenure, which began in 2018 and extends through 2026, has been marked by challenges, including navigating the economic fallout of the COVID-19 pandemic and the subsequent inflationary surge, but his legal protections make Trump’s threat of termination largely symbolic.
The broader implications of this conflict extend beyond personal animosity. The administration’s tariff policies, while aimed at bolstering domestic manufacturing, risk increasing consumer prices and disrupting global supply chains, factors the Fed must account for in its rate decisions. Meanwhile, Trump’s public pressure on the Fed could undermine confidence in its independence, potentially unsettling markets already grappling with uncertainty over trade policy and inflation. The ECB’s rate cuts, by contrast, reflect a different economic reality, with Europe facing weaker growth prospects and less persistent inflation than the U.S. Trump’s invocation of the ECB as a model overlooks these distinctions, highlighting a fundamental disagreement over the pace and direction of monetary policy. As the Fed navigates this politically charged environment, Powell’s ability to maintain credibility and focus on data-driven decisions will be critical to stabilizing expectations and supporting long-term economic stability.
WallStreetPit does not provide investment advice. All rights reserved.
Leave a Reply