President Trump is zeroing in on the Federal Reserve and setting up a fight with its leader, Jerome Powell.
The president is eager for the Fed to speed up planned interest rate cuts and ease pressure on the economy amid deepening concern about his trade agenda. The Fed, in turn, is preparing for a potential price shock driven by Trump’s tariffs, which would delay any rate cuts, even if the economy weakens.
Trump has shown so far only mild annoyance with the Fed. While he badgered the central bank after it held off on rate cuts Wednesday, he has held off on direct threats.
But as the White House takes aim at the independence of agencies, Powell is unlikely to bow to being forced out, even if tensions with the White House were to hit a critical point before his term is up next year.
Ian Katz, director at Washington research firm Capital Alpha Partners, said he doesn’t expect Trump to try to fire Powell, given the turmoil it could cause for markets.
Even so, Katz warned, “given how aggressive Trump has been in asserting as authority so far this term, you can’t rule out anything.”
Trump has taken aggressive steps to increase his control of the federal government and reshape it in line with his political whims. The Trump administration has pushed vast cuts to major agencies, ousting thousands of nonpolitical employees.
The Trump administration has also imposed new rules on independent agencies, requiring them to submit proposed regulations to the White House for review before publication.
Trump and top economic officials have said their attempts to influence the Fed are limited to its regulatory oversight of big banks, not its control of monetary policy. But the president has nonetheless nudged the Fed toward cutting interest rates amid increasing concern about the economy.
Trump has doubled down on pressuring the Federal Reserve to cut interest rates, arguing that the costs of food — specifically, eggs — and gas are down, so the central bank can make cuts.
“Groceries, generally, prices are coming down, and energy prices are coming down. And, I hope the Fed lowers interest rates, and then you’re going to see interest rates coming down,” Trump said during a Cabinet meeting Monday, after posting on Truth Social multiple times that interest rates should be cut.
But when the Fed announced Wednesday that it would keep rates steady at a range of 4.25 percent to 4.5 percent, Powell said Trump’s tariff plans would likely halt the bank’s progress in bringing down inflation.
“I do think with the arrival of the tariff inflation, further progress may be delayed,” Powell said.
He pointed out that a new Fed economic forecast released the same day “doesn’t really show further downward progress on inflation this year, and that’s really due to the tariffs coming in.”
Powell has also described economic uncertainty as “unusually elevated,” which poses a challenge to the Fed as it attempts to get ahead of potential price increases.
Trump, meanwhile, is steaming ahead with plans to impose new reciprocal tariffs next month. The president has been referring to April 2, when he has vowed to match tariffs that trading partners put on products from the U.S. in an effort to promote fairness, as “liberation day.”
Trump’s back-and-forth tariff orders have deepened concern about the state of the U.S. economy, which could have eventually led the Fed to cut interest rates at a quicker pace.
The Fed is expected to cut interest rates twice this year, and projected two cuts Wednesday after holding rates steady.
But Raphael Bostic, president of the Federal Reserve Bank of Atlanta, said in a Monday interview with Bloomberg News that Trump’s tariffs will delay those efforts. He now only supports one cut this year after previously calling for two.
“The appropriate path for policy is also going to be pushed back,” Bostic said.
Meanwhile, Trump on Monday defended his upcoming tariffs as a way to further improve the economy.
“I’d like to see the Fed lower interest rates. That’s just my opinion, because things are coming down. We have inflation under control, tremendous amounts of money will be soon coming in from tariffs, which, is about time that we were able to partake. We’ve been ripped off by every country on that basis, and it’s about time,” Trump said during the Cabinet meeting.
The president weighing in on decisions of the Fed, an independent agency, comes as he dismissed two Democratic members of the Federal Trade Commission (FTC), raising new questions about the future of independent agencies.
At the root of concerns over whether the Trump administration can fire the FTC commissioners is the 1935 Supreme Court decision, Humphrey’s Executor v. United States, that granted protections against a president removing members of the independent boards without cause.
When asked if the ultimate goal of the FTC firings are to have the Supreme Court overturn that ruling, White House press secretary Karoline Leavitt last week said, “The goal was to let these individuals go. … [If we have] to fight it all the way to the Supreme Court, we certainty will.”
Powell’s term ends in 2026, and he said in November he wouldn’t step down earlier, even if Trump asked him to do so. He added at the time that it is “not permitted under the law” for the president to fire or demote him or any of the other Fed governors with leadership positions.
After threatening to fire him — after having appointed him — for most of his first presidency, Trump said last summer that he would let Powell serve out his term, “especially if I thought he was doing the right thing,” but that he would not reappoint him for another term.
A source close to the White House said Trump trying to fire Powell is a possibility, but suggested the White House is also considering their options.
“I don’t think Jerome Powell is going to leave of his own volition. I think Trump may try to fire him, but I also think that Jerome Powell is sufficiently secure and impresses that he wouldn’t leave voluntarily. So, the question becomes, can Trump actually fire him not for anything less than cause?” the source said.
Attempting to fire Powell before a potential Supreme Court decision revisiting Humphrey’s Executor that clears the way would stun the financial world and likely lead to a steep stock market sell-off.
“I suspect that [Trump has] gotten some advice along the lines of, ‘This isn’t a court battle that you would win, and also that it could really upset the markets,’” Katz said.
“Markets would have some concern about a ruling that clearly gives the president a lot more influence in monetary policy,” Katz added. “I don’t think the markets would love that.”
The White House said it did not have any announcements when asked for comment on if the administration thinks it has authority to fire a Fed official, following the removal of two FTC commissioners, and if Trump still plans to allow Powell to finish out his term.
“President Trump’s economic agenda has stopped crushing inflation, lowered mortgage rates, brought in historic investments, and leveled the playing field for American companies. There are no new personnel announcements at this time,” spokesperson Taylor Rogers said.
