Trump intensifies pressure on the Fed for immediate rate cuts, even threatening to remove Chair Jerome Powell.
Legal authority for a sitting president to fire the Fed Chair remains highly uncertain.
Trump seeks to appoint loyalists and expand influence over the Fed during his second term.
The Fed faces a policy dilemma between rising inflation and economic slowdown from the trade war.
The 90-day tariff delay announced on April 9 helped avoid immediate market chaos, but underlying tensions persist.
Opinion
Trump’s escalating pressure campaign against the Fed raises serious risks to the credibility and stability of U.S. monetary policy. Political interference at this level could permanently damage perceptions of the Fed’s independence. While Powell is reluctant to preemptively cut rates due to inflation concerns, Trump is demanding immediate easing to support the economy, creating an intense institutional collision. This struggle could become one of the most critical stress tests for the legal and operational framework of the modern Fed.
Core Sell Point
Trump’s rate cut demands and threats to remove Powell represent a major challenge to Fed independence, injecting heightened uncertainty into U.S. monetary policy and financial markets at a critical time.
Former President Donald Trump has escalated his confrontation with the Federal Reserve, pressing for aggressive interest rate cuts and even hinting at removing Fed Chair Jerome Powell. However, legal experts widely agree that a president’s authority to dismiss a sitting Fed Chair mid-term is legally ambiguous and would likely trigger a prolonged Supreme Court battle.
In his second term, Trump is actively seeking to reshape the Fed, aiming to install loyalists and assert greater influence over U.S. monetary policy. In contrast, Powell remains cautious, prioritizing inflation risks over immediate economic stimulus, despite mounting concerns over a slowdown triggered by escalating trade tensions.
This standoff puts the credibility and independence of U.S. monetary policy to a historic test. Although the 90-day suspension of new tariffs on April 9 provided temporary relief to markets, fundamental frictions between the White House and the Fed remain unresolved.
Adding to the tensions, Trump recently declared that Powell’s "term needs to end soon," signaling a more aggressive stance toward reshaping the central bank’s leadership structure.
Meanwhile, inflation has already surpassed the Fed's 2% target, and the risk of further price increases due to the trade war complicates the Fed's path forward. Cutting rates now risks fueling inflation, while maintaining current rates could deepen an economic recession, placing the Fed in a precarious policy trap.
In Congress, skepticism is growing. Representative Patrick McHenry warned that "any attempt to remove Powell would only inject further instability into an already fragile environment," while Representative Frank Lucas emphasized that Fed independence was established as a foundational principle by Congress.
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