Recent developments have shown that former President Donald Trump is expressing discontent with Jerome Powell, the current head of the U.S. central bank. Trump’s frustration stems from Powell’s decision to cut federal interest rates by 75 basis points just before the upcoming 2024 election, yet his hesitation to further ease monetary conditions due to potential inflationary consequences tied to new White House tariff policies.
For some time now, Trump has hinted at the possibility of firing Powell. The Federal Reserve Chair, however, has consistently maintained that Trump does not possess the legal authority to terminate his leadership. Powell’s term is set to continue until May 2026, regardless of external pressures.
This weekend, Trump publicly criticized Powell, stating, “Jerome Powell has been very bad for our country. We should have the lowest interest rate on Earth, and we don’t. He just refuses to do it.” Such remarks highlight the ongoing tension between the former president and the Federal Reserve chair, as Trump seeks to align monetary policy more closely with his economic vision.
The opposition against Powell appears to be gaining momentum. Recently, Bill Pulte, the director of the Federal Housing Finance Agency (FHFA), accused Powell of political bias and called for a congressional investigation into his actions. Additionally, Republican lawmakers, including Senators Rick Scott and Tommy Tuberville, along with House Judiciary Chair Jim Jordan, have voiced their criticisms of Powell’s recent decisions.
Adding to the chorus of discontent is Kevin Warsh, a former Federal Reserve governor and a potential successor to Powell, who advocates for a “regime change” at the Fed. This growing coalition of dissent suggests an increasing challenge for Powell, who is fundamentally protected by the independent nature of the Federal Reserve. He can only be removed from office for justifiable cause.
Critics of Powell have seized upon the Federal Reserve’s recent $2.5 billion headquarters renovation as a new avenue for attack. Allegations have surfaced regarding potential misconduct and claims that Powell misled Congress during his testimony about the project, which was initiated well before his 2018 appointment by Trump.
As pressures mount, Treasury Secretary Scott Bessent recently indicated that a “formal process” for finding Powell’s successor has begun. Congresswoman Anna Paulina Luna even tweeted that Powell’s dismissal was “imminent,” which has heightened speculation and led to a spike in betting odds regarding this outcome.
Rumors intensified over the last few days, with reports suggesting that Trump is contemplating a decisive move against Powell. However, the former president has since downplayed these claims and the accusations regarding the renovation project, asserting he has no immediate plans to dismiss Powell.
As we navigate this evolving saga, it is essential to remain focused on the implications for monetary policy. According to the CME FedWatch tool, the likelihood of rate cuts during the upcoming Federal Open Market Committee meeting on July 30 is a mere 2.6%. Yet, projections for September indicate an almost 60% chance of a reduction, which illustrates the uncertain climate surrounding U.S. monetary policy.
