WASHINGTON (AP) — President Donald Trump attacked Federal Reserve Chair Jerome Powell on Thursday for not cutting interest rates and said he could fire him if he wanted to, renewing a threat from his first term that could cause a major legal showdown over the issue of the central bank's longstanding political independence.
“If I want him out, he’ll be out of there real fast, believe me," Trump said in the Oval Office while taking questions from reporters with Italian Prime Minister Giorgia Meloni. “I'm not happy with him.”
Trump's comments followed a posting on his social media site in which he called on Powell to cut the Fed's short-term interest rate and said, "Powell’s termination cannot come fast enough!”
The Republican president's attacks — and the suggestion that he could remove Powell from his position, which the Fed Chair has denied — come as the Supreme Court is considering a case that could make it easier for presidents to fire the heads of independent agencies such as the Fed.
Powell has steadfastly maintained that the Fed is independent from politics, a stance that Fed chairs have zealously guarded since at least the 1970s. Back then, the Fed was widely seen as worsening a 15-year run of high inflation by giving in to demands from then-President Richard Nixon to keep interest rates low in the run-up to the 1972 election.
Economic research has suggested an independent central bank is more likely to keep inflation in check, because it is more willing to do unpopular things to fight rising prices, such as lift interest rates. Wall Street investors also largely prefer an independent Fed, though the stock market did not appear to react to Trump's comments.
Powell, in remarks at the Economic Club of Chicago on Wednesday, said the Fed will base its decisions solely on what's best for all Americans.
“That’s the only thing we’re ever going to do,” Powell said. “We’re never going to be influenced by any political pressure.”
“Our independence is a matter of law,” Powell added. “We’re not removable except for cause. We serve very long terms, seemingly endless terms.”
Trump said that inflation is falling and complained that interest rates are still rising “because we have a Federal Reserve chairman that is playing politics.”
Powell's term does not expire until May 2026. Trump's broadsides come a day after Powell signaled that the Fed will keep its key interest rate unchanged while it seeks "greater clarity” on the impact of policy changes in areas such as immigration, taxation, regulation and tariffs.
Trump and members of his economic team have said they would like longer-term interest rates to fall, which would make it cheaper for Americans to borrow to buy homes, cars and appliances. Yet the Fed controls a short-term rate and can only indirectly affect longer-term borrowing costs, which rose after Trump announced sweeping tariffs.
Powell also reiterated that Trump's tariffs would likely raise inflation and slow the economy, which could make it harder for the Fed to cut rates anytime soon. And the Fed chair suggested that the central bank will focus on fighting inflation in the wake of the tariffs, even if the duties did weaken the economy.
Powell was initially nominated by Trump in 2017, and he was appointed to another four-year term by President Joe Biden in 2022. At a November news conference, Powell indicated he would not step down if Trump asked him to resign.
He has also said that the removal or demotion of top Fed officials was “not permitted under the law.”
Trump's comments come with the backdrop of a legal case at the Supreme Court that stems from Trump's firings of officials from two independent agencies. The Supreme Court last week let the firings stand while it considers the case. It could issue a broader ruling this summer that would enable the president to fire Fed officials, including the chair.
Powell said the Fed is watching the case closely, adding that it might not apply to the Fed. Lawyers for the Trump administration have also argued that allowing the president to fire the two officials wouldn’t erode the Fed’s independence.
In a 2024 mid-campaign interview with Bloomberg News, Trump said he would allow Powell to serve out his term as chair, which ends in May 2026.
Earlier this month, Trump's top economic adviser, Kevin Hassett, said in a television interview that “there's not going to be any political coercion over the Fed, for sure.”
Powell started Trump’s second term in a relatively secure spot with a low unemployment rate and inflation progressing closer to the Fed’s 2% target, conditions that could have spared the U.S. central banker from the president’s vitriol.
But Trump’s aggressive and haphazard tariffs have increased the threat of a recession with both higher inflationary pressures and slower growth, a tough spot for Powell, whose mandate is to stabilize prices and maximize employment. With the economy weakening because of Trump’s choices, the president appears to be looking to pin the blame on Powell.
Trump has unleashed a rash of tariffs that have put the U.S. economy and the Fed in an increasingly perilous spot. On April 2, the president rolled out aggressive tariff hikes based off U.S. trade deficits with other nations, causing a financial market backlash that almost immediately led him to announce a 90-day pause. But Trump increased his tariff hikes on China to a rate of 145%, in addition to his existing tariffs on Canada, Mexico, autos and steel and aluminum.
Wall Street banks such as Goldman Sachs have raised their odds that a recession could start. Consumers are increasingly pessimistic in surveys about their job prospects and fearful that inflation will shoot up as the cost of the import taxes get passed along to them.
The Budget Lab at Yale University estimated that the increased inflationary pressures from the tariffs would be equal to the loss of $4,900 in an average U.S. household.
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AP journalist Sagar Meghani contributed reporting.