Trump Unhappy with Fed Chair Powell

Donald Trump is displeased with Jerome Powell, the head of the U.S. central bank.

Reason for Trump’s Discontent

Powell recently cut federal interest rates by 75 basis points ahead of the 2024 election but has been reluctant to ease monetary conditions further due to inflation concerns tied to the White House’s new tariff policies.

Trump has suggested firing Powell, though the Fed chair has maintained since November that Trump lacks the legal authority to do so. Powell’s term ends in May 2026.

> “Jerome Powell has been very bad for our country,” Trump stated over the weekend. “We should have the lowest interest rate on Earth, and we don’t. He just refuses to do it.”

Growing Opposition to Powell

The coalition against Powell is expanding, with figures like Bill Pulte, director of the Federal Housing Finance Agency (FHFA), accusing him of political bias and calling for a congressional investigation into his leadership. Republican members of Congress, including Senators Rick Scott and Tommy Tuberville and House Judiciary Chair Jim Jordan, have also criticized Powell.

Kevin Warsh, a former Federal Reserve governor and potential Powell replacement, has voiced that it’s time for a “regime change” at the Fed.

Independence of the Federal Reserve

The Federal Reserve operates independently, meaning Powell can only be removed “for cause,” requiring serious legal justification. Critics are now questioning the $2.5 billion renovation of the Fed’s headquarters, alleging potential misconduct or misleading testimony from Powell regarding the project.

Increasing Pressure

Recently, pressure on Powell has intensified. Treasury Secretary Scott Bessent indicated a “formal process” to replace Powell was underway, while Congresswoman Anna Paulina Luna stated that Powell’s firing was “imminent,” boosting Polymarket odds of the event to 27%. On Wednesday, reports surfaced that Trump was considering a decision soon, with claims he had drafted a dismissal letter.

However, Trump later denied planning to fire Powell and downplayed any allegations of fraud regarding the renovation.

Looking Ahead

Currently, CME FedWatch suggests a mere 2.6% chance of interest rate cuts at the next Federal Open Market Committee (FOMC) meeting on July 30, with odds rising to almost 60% by September.