- Trump reportedly considered firing Fed Chair Jerome Powell, calling him “Too Late” for not cutting rates in 2025.
- Despite pressure, Powell’s 4.3% policy rate aligns with current economic conditions—steady job growth and persistent inflation.
- Firing Powell would likely spook markets, drive up long-term interest rates, and undermine Trump’s own economic goals.
President Donald Trump’s ongoing feud with Federal Reserve Chair Jerome Powell just escalated—again. According to reports, Trump recently polled a group of House Republicans on whether he should fire Powell, even going so far as to share a draft termination letter. While the president’s frustrations aren’t new, acting on them could seriously backfire—politically, economically, and financially.
Trump’s Fed Frustration Grows
Trump’s distaste for Powell has been simmering for years, but it’s now boiling over. He’s slammed the Fed chair for keeping interest rates too high—currently hovering around 4.3%—despite Trump’s repeated calls for a drop to 1%. He’s accused Powell of dragging his feet on rate cuts, dubbing him “Too Late,” and even sent him a handwritten letter blaming the Fed’s monetary stance for costing the U.S. “a fortune.” Trump’s gripes have extended beyond policy; he’s also fumed over the Fed’s headquarters renovation, criticizing its $900 million overrun.
Still, the facts tell a different story. Inflation has remained elevated, with June’s core CPI hitting 2.9%, slightly above May’s 2.8%. Unemployment sits at 4.1%, unchanged from a year ago, and new payroll job growth is steady. Despite Trump’s complaints, the Fed’s reluctance to slash rates has not derailed labor markets or weakened financial conditions.
Why the Fed Isn’t Cutting—Yet
From a macro view, the Fed’s rate-hold stance is justified. Yes, inflation remains sticky, but not dangerously so. Meanwhile, financial conditions remain loose, meaning the current 4.3% rate hasn’t significantly constrained credit or spending. However, some signs of a slowdown are starting to show—retail sales are slipping, and consumer spending has stagnated. A trade war-driven inflation spike adds another layer of complexity, making it risky for the Fed to act hastily.
Markets largely expect the Fed to start cutting rates before the end of 2025. But even so, monetary policy works with long lags. Cutting too soon—especially in response to political pressure—could erode credibility and amplify inflation expectations, which are already looking jumpy in consumer surveys.
Why Firing Powell Would Be a Major Error
Trump’s goal of pushing rates lower is understandable, especially ahead of an election year. But ironically, firing Powell could trigger the opposite outcome. Markets—particularly those that set long-term interest rates on mortgages and business loans—rely on the Fed’s perceived independence. Removing Powell prematurely or replacing him with a political ally could spook investors, raise inflation expectations, and send long-term rates soaring.
Even if Trump waits for Powell’s term to end in May 2026, installing someone viewed as a presidential puppet could cause similar market reactions. Confidence in the Fed’s ability to manage inflation and steer the economy independently has been one of the key anchors of U.S. economic stability.
The Bigger Picture: Political Drama Meets Market Logic
Trump may view Powell as an obstacle to his economic vision, but dismantling Fed independence would do more harm than good. It would rattle markets, inflate borrowing costs, and likely undercut Trump’s own ambitions for growth and low inflation. At a time when inflation expectations are still shaky and trade tensions threaten supply chains, the last thing the economy needs is a political crisis at the Fed.
The Fed’s cautious stance may be frustrating to politicians seeking short-term wins, but it’s rooted in the long-term health of the U.S. economy. Firing Powell might feel like a show of strength—but it could be a costly misstep in disguise.