Trump Attacks Powell and Threatens Independence of the Federal Reserve

No one relishes the dismissal of others quite like Donald Trump when it comes to Federal Reserve Chairman Jerome Powell. Trump believes that the U.S. central bank should have already lowered interest rates this year and that it should do so now in any case.

Although Trump nominated Powell for this position during his first term, he now gives him uncreative nicknames like ‘Too Late’ (engl. Too Late) and posts on his social media platform Truth Social that ‘Powell’s dismissal cannot come soon enough‘. It is currently unclear whether Trump meant the planned end of Powell’s term in that post or if he wants to remove him from the position of Federal Reserve Chairman.

Powell’s term as Fed Chairman lasts until May of next year, while his governorship lasts until February 2028. However, Trump’s comments come a day after Powell stated in Chicago that the Fed is not in a hurry to lower interest rates and is waiting for greater clarity on the prospects of the U.S. economy. In other words, he is waiting for more favorable economic data.

On the other hand, Trump’s willingness to dismiss top officials of institutions that have long been considered to have a certain degree of independence from the White House has come into focus in recent months after his administration removed several officials from the Federal Trade Commission, the National Labor Relations Board, and the Merit Systems Protection Board.

The dismissals of high-ranking officials who do not align with Trump’s wishes are the most direct challenge to the U.S. Supreme Court, which laid the foundations for the independence of such institutions back in 1935. Powell has also repeatedly stated that ‘the independence of the Fed is a matter of law’ and that the Fed’s statute shows that ‘there is no removal’ of the chairman unless there is a specific reason for it.

‘Another Typical Mess’

U.S. Treasury Secretary Scott Bessent indicated earlier this week that the timeline for considering Powell’s successor is about six months away and also stated that the independence of the Fed in making monetary policy is a treasure that ‘needs to be preserved.’

Trump criticized Powell during his first presidential term, and the latest criticisms could revive the debate in Washington about the independence of the central bank from the White House. It is also worth noting that the increase in tariffs has raised concerns about slowing U.S. growth and rising inflation, making the Fed’s main job of creating monetary policy even more challenging.

Trump’s statements came just before the European Central Bank lowered interest rates again. He mentioned this in his post, stating that ‘too late’ Jerome Powell from the Fed is still ‘reacting too late and making mistakes’ and that he released a report that is ‘another typical mess.’ He added that oil and food prices are falling and that the U.S. is ‘getting rich’ from tariffs.

According to Bloomberg, the price of oil has fallen more than 10 percent this year, but food prices continue to rise, having increased by 2.4 percent over the past 12 months. In his speech at the economic conference in Chicago, Powell also reiterated that the Fed must ensure that tariffs do not cause a longer-term rise in inflation.

– Our obligation is to keep long-term inflation expectations well anchored and to ensure that a one-time increase in prices does not become a permanent inflation problem – Powell said.

Support from Europe

The Fed Chairman has repeatedly stated that he intends to serve his full term, and he emphasized this week that he will never be influenced by any political pressure.

– People can say whatever they want, but we will do what we do regardless of political or any other external factors – Powell stated, receiving support from European Central Bank President Christine Lagarde. Lagarde said today at a press conference in Frankfurt that she has ‘great respect for her esteemed colleague and friend.’

She declined to further comment on Trump’s criticisms but stated that the independence of the central bank is a ‘fundamental principle’ within the eurozone and that a ‘good’ relationship between the European Central Bank and the Fed would help support global financial stability.

– We have shown in the past that we can indeed operate on that basis and we will continue to do so in an unconstrained and unchanged manner. I am confident of that – Lagarde said, commenting on the relationship between central banks.

Global markets remained stable following Trump’s latest announcement, with the S&P 500 rising by 0.2 percent by late morning trading. The yield on 10-year U.S. Treasury bonds rose by 0.04 percentage points to 4.32 percent.