Trump targets Fed Chair Powell, questions central bank independence
Criticism from Donald Trump towards Fed Chair Jerome Powell is intensifying. Trump called the Federal Reserve chair a "major loser" on Truth Social and warned that the U.S. economy might slow down if interest rates are not immediately lowered. The Trump administration is exploring whether it is legally possible to dismiss the central bank's chairman before his term ends.
Donald Trump is putting increasing pressure on Fed Chair Jerome Powell. On Monday, he called him a "major loser". He warned that the U.S. economy might slow down if interest rates are not immediately lowered, reports CNBC.
"Preemptive Cuts’ in Interest Rates are being called for by many," Trump wrote on Truth Social.
"With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW," Trump wrote.
The latest attack by Trump on Powell, whom he appointed during his first term, came as the president and his team are examining whether they can legally dismiss the central bank's chairman before his term ends in May 2026, as CNBC reminded.
Krishna Guha, vice chairman at Evercore ISI, warned in an interview with CNBC that any attempt by President Donald Trump to remove Federal Reserve Chair Jerome Powell could trigger a significant selloff of stocks and bonds. Guha suggested that such a move would call into question the Federal Reserve's independence, leading to higher yields, a weaker dollar, and a stock selloff.
"I can't believe that's what the administration is trying to achieve," Guha said.
American television notes that the stock market, already shaky due to increased uncertainty and other concerns arising from the Trump administration's broad tariff plans, experienced further declines on Monday. The Dow Jones Industrial Average dropped by 750 points, nearly 2% in the first hour of trading, and Nasdaq by 2.6%.
A change at the Fed Chair position?
Last week, Trump declared that if he wanted, Federal Reserve Chair Powell would leave the position "real quick." Once again, he criticized the central bank's head, claiming that he owes people a reduction in interest rates. The President assured that he has the right to dismiss Powell.
As highlighted by CNN on Friday, according to many experts, Trump is not authorized to fire the Fed chair, but the President has clearly indicated that he might want to break with existing rules, even if it involves potentially huge consequences.
According to CNN, the main candidate to take over the position of central bank head in place of Powell—either after his term ends in 2026 or sooner—is Kevin Warsh. Trump considered his candidacy for Treasury Secretary in his second term.
Bessent told Bloomberg that talks with candidates to succeed Powell will begin in the fall. According to some observers, Scott Bessent became the Treasury Secretary, keeping Warsh in reserve as a possible future candidate for Fed chair.
An exemplary bank chair
The head of the French central bank, Francois Villeroy de Galhau, quoted on Friday by Reuters, assessed that Powell is an exemplary bank chair who speaks the truth about the state of the American economy and does not succumb to political pressures.
On Thursday, Trump once again criticized Powell, claiming he is not doing his job well. He assessed that "he is always late" in lowering interest rates. He stated that the Fed chair is putting the U.S. in a worse position compared to Europe because the European Central Bank is consistently lowering its rates, while Powell has been holding off since December.
Trump's criticism was a response to Wednesday's speech by the Fed chair in Chicago, in which he assessed that tariffs imposed by Trump could contribute to an increase in inflation—possibly for a longer time—and a decrease in economic growth. He also suggested that due to the uncertainty surrounding trade policy, the Federal Reserve will hold off on further rate cuts.
