Washington
UJ
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On Thursday, President Donald Trump intensified his attacks on Federal Reserve Chair Jerome Powell, demanding his “termination” for not reducing interest rates swiftly enough. This statement followed Powell’s recent warning regarding the impact of Trump’s extensive tariffs on the economy.
In a tweet early Thursday, Trump criticized the Fed leader, claiming that the U.S. central bank is trailing behind its European counterpart. Later that morning, the European Central Bank announced its seventh interest rate cut in the past year.
“Jerome Powell of the Fed, who is consistently TOO LATE AND WRONG, issued another chaotic report yesterday,” Trump expressed. “Powell’s termination can’t come soon enough!”
On Wednesday, Powell stated that the Trump administration has enacted “very fundamental policy changes,” which include tariffs that are “considerably larger than anticipated.” He noted that these developments are unprecedented in modern history, placing the Fed in unfamiliar territory and presenting challenges not faced in decades; namely, stagflation.
However, Powell’s statements align with those of other Fed officials in recent weeks. Most have indicated that Trump’s tariffs are likely to elevate inflation and unemployment. Some wealthy individuals, like Ray Dalio, have gone further to suggest that the U.S. economy may already be in or close to a recession.
Powell, who was appointed as Fed chair by Trump in 2018 and subsequently reappointed by President Joe Biden in 2021, has a term that expires in May 2026.
The Trump-Powell Tensions and Fed Independence
Trump has repeatedly threatened to dismiss Powell, with his criticism dating back to 2018, when Powell assumed the leadership of the world’s most influential central bank.
The Fed raised interest rates multiple times that year due to concerns that a historically tight job market could trigger higher inflation. In 2019, Trump referred to Powell as “the enemy.” In March 2020, he asserted to reporters his “right to remove (Powell) as chairman,” criticizing him for several poor decisions amidst a market downturn triggered by the pandemic, while also commending him for reducing rates to zero to avert an economic disaster.
Recently, Trump mentioned that he would not appoint Powell for a third term, stating he would allow him to complete his current term “especially if I thought he was doing the right thing,” as per a Bloomberg interview published in July.
For his part, Powell has explicitly stated that removing a Fed chair is “not permitted under the law,” and has affirmed his intention to fulfill the remainder of his term.
Nevertheless, the legal protections that come with the Fed’s status as an independent government agency may be in question. Trump has previously fired two Democratic members of the Federal Trade Commission, an also independent agency, arguing that their “continued service on the FTC is inconsistent with my administration’s priorities,” as reported by the Wall Street Journal in a letter he sent to them.
Meanwhile, the Supreme Court is expected to reconsider a case that could significantly undermine the Fed’s independence.
The 1935 case, Humphrey’s Executor v. United States, set a precedent concerning the extent of the president’s power in dismissing agency heads. This case revolved around William Humphrey, a conservative commissioner on the Federal Trade Commission, who was fired by Franklin Roosevelt in 1933 over policy disagreements, as noted by the Brookings Institution in a 2018 analysis.
Humphrey’s executor, who sued for damages after Humphrey’s death shortly following his dismissal, won the case. The Court ruled that the Constitution does not grant the president “illimitable power of removal.” In February, the Trump administration sought to overturn this precedent.
In addition to the FTC dismissals, Trump also dismissed a Democratic member of the National Labor Relations Board and another individual on the Merit Systems Protection Board who identifies as a Democrat, both of whom have since sought to regain their jobs. Chief Justice John Roberts requested that both parties submit briefs last week.
This is an evolving story and will be updated.
