WASHINGTON — Former U.S. President Donald Trump has escalated tensions with the Federal Reserve, threatening to remove Fed Chair Jerome Powell if interest rates aren’t cut to support his economic agenda.
“If I want him out, he’ll be out of there real fast, believe me,” Trump said Thursday, signaling potential interference in the central bank’s operations. Powell, whose term runs through May 2026, responded firmly, saying he has no plans to step down and reaffirmed that the Fed’s independence is a “matter of law.”
The confrontation stems from Trump’s push for rate cuts to counter the impact of his proposed 10% baseline tariff on imports, which many economists warn would raise prices and slow growth. Experts believe this would keep inflation above the Fed’s 2% target, reducing the likelihood of near-term rate cuts.
“They’re not going to react because Trump posted that they should be cutting,” said Stephanie Roth, chief economist at Wolfe Research. “That would be a recipe for a disaster.”
Most legal scholars agree the president cannot fire the Fed chair without cause, as the institution is designed to operate independently of political pressure. Roth added, “Independence is absolutely critical for the Fed.”
A looming legal case could challenge a 1935 Supreme Court ruling that protects leaders of independent agencies from presidential dismissal without cause, potentially reshaping the Fed’s autonomy.
However, analysts say market forces may be the strongest check on interference. During recent tariff-induced volatility, bond yields spiked and the dollar fell, forcing the administration to pause tariff plans to stabilize markets.
“You can’t control the bond market. And that’s the moral of the story,” said economist Diane Swonk. “And that’s why you want an independent Fed.”