Quick overview
- President Trump is considering firing Federal Reserve Chairman Jerome Powell due to disagreements over interest rate cuts.
- Trump's administration believes that earlier interest rate cuts could have mitigated recent stock market declines.
- Powell's cautious approach is influenced by concerns over inflation amid ongoing trade tensions with China.
- Despite potential changes in leadership, the Federal Reserve's decision-making is based on a consensus among its 12-member committee.
Jerome Powell, the Federal Reserve Chairman, is in the crosshairs of President Donald Trump and his administration, and there is talk that he will be replaced.
Trump and his team are already looking into the possibility of firing Powell, even though Trump appointed him back in 2017 during his previous presidential administration. An economic advisor for the National Economic Council, Kevin Hassett, says that Trump’s administration would like to remove Powell from his Federal Reserve position.
Since Trump took office, he and Powell have butted heads over interest rate cuts, particularly how many of them there should be this year and how large they should be. Powell has been conservative in leading the Fed in interest rate cuts, preferring to hold off on more cuts until the U.S. inflation rate decreases. Trump has been demanding that more cuts be made in order to dampen some of the impact of Trump’s new tariffs on the stock market.
If the Fed under Powell had issued interest rate cuts earlier this year, it might have diminished some of the drastic decline that we have seen occur on the stock market indices.
Can Trump Fire Powell?
The Federal Reserve Chair is a position that is approved by Congress but appointed by the President. Both Trump and Biden have nominated Powell to lead the Fed over the last eight years. As it stands now, Powell’s term will be up on May 15th, 2026.
Hassett said that the President as well as his administration team are still looking into the matter. His remark makes it sound as though there is a measured response coming from the current administration. Trump’s personal remarks on social media tell a different story, though. Trump said in a post on Thursday that termination for Powell “cannot come fast enough.”
Trump strongly believes that interest rates should be cut right now, but Powell is concerned that inflation will grow as the current trade war continues. As Trump issues new tariffs, other countries are firing back with tariffs of their own, most notably China with its massive retaliatory tariffs. The trade war is so fierce right now that China has warned other countries that do business with the United States that it will hit them with additional tariffs as well.
Reportedly, the U.S. is trying to negotiate with other countries to impose trade restrictions on China. The Chinese government believes that is exactly what is happening, so they are fighting back. If the trade war continues, there is serious concern from the Fed that the result will be higher inflation as well as market stagnation. As price hikes loom, economic growth is expected to stutter.
If Powell were removed from his position, the Fed may still continue on its current trajectory. That is because the Federal Reserve makes decisions based on the consensus of a 12-member group
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