Trump’s war on Powell: The fight to control the Fed

In the gilded chaos of American politics, where spectacle often trumps substance, a new drama has emerged, pitting President Donald Trump against Federal Reserve Chair Jerome Powell in a high-stakes feud over interest rates. This clash, marked by Trump’s threats to fire Powell and his relentless public insults, is more than a personal vendetta; it’s a collision of economic philosophy, political ambition, and institutional integrity. As markets quiver and gold prices soar, the question looms: Can the Federal Reserve, a cornerstone of global economic stability, withstand the pressure of a president who views its independence as an obstacle to his agenda?

The saga began in earnest in April 2025, when Trump, freshly emboldened by his return to the White House, intensified his attacks on Powell. On Truth Social, he dubbed Powell “Mr. Too Late, a major loser,” demanding immediate interest rate cuts to juice an economy he claimed was teetering on the edge of a slowdown. “Unless Mr. Too Late lowers interest rates, NOW,” Trump posted, “the economy risks slowing.” His rhetoric was not new — Trump has long viewed low interest rates as a panacea for economic woes, a reflex rooted in his real estate days when cheap borrowing fueled his empire. However, the ferocity of his 2025 salvos, coupled with explicit threats to oust Powell, has sent shockwaves through Wall Street and beyond.

Powell, for his part, has remained steadfast, a bespectacled technocrat unmoved by the president’s bluster. Speaking at the Economic Club in Chicago on April 16, 2025, he warned that Trump’s proposed tariffs — sweeping levies on imports — would likely stoke inflation and raise consumer prices, complicating the Fed’s delicate balancing act. “There’s a strong likelihood that consumers would face higher prices and that the economy would see higher unemployment as a result of tariffs in the short run,” Powell said, his tone measured but firm. This was not defiance for defiance’s sake; it was a defense of the Fed’s dual mandate to control inflation while maximizing employment, a mission that often puts it at odds with political expediency.

The Federal Reserve, established in 1913, was designed to be insulated from such pressures. Its Board of Governors, including the chair, is appointed to staggered 14-year terms and can only be removed for “cause” — typically misconduct, not policy disagreements. Yet Trump’s threats to fire Powell have raised a thorny question: Does the president have the legal authority to do so? The Federal Reserve Act is ambiguous on this point, omitting specific limits on the removal of the chair, who serves a four-year term as one of the seven members of the Board of Governors. No president has ever attempted to fire a Fed chair, leaving the issue untested in court. However, related lawsuits over Trump’s earlier firings are winding through the judiciary, with one case pending before the Supreme Court that could set a precedent. Powell himself has been clear: “Our independence is a matter of law,” he said last week, signaling he would not resign if pressed.

Trump’s assault on Powell is not merely about interest rates; it’s part of a broader vision to bend institutions to his will. His attacks dovetail with proposals from Project 2025, a conservative blueprint that advocates curbing the Fed’s powers, including stripping its mandate to reduce unemployment and giving elected officials greater sway over monetary policy. Such moves would upend a century of precedent, undermining the Fed’s role as a nonpolitical stabilizer of the U.S. economy — and, by extension, the world’s. The International Monetary Fund, in a rare rebuke, restated the importance of central bank independence after Trump’s tirades, with chief economist Pierre-Olivier Gourinchas warning of market destabilization.

Markets have already felt the heat. On April 21, 2025, the S&P 500 tumbled 2.4%, with the Dow dropping 950 points, as Trump’s attacks on Powell fueled fears of a compromised Fed. The U.S. dollar index hit a three-year low, while gold, a haven for jittery investors, surged to a record $3,500.05 per troy ounce. Bond yields spiked, with the 10-year Treasury note climbing above 4.4%, reflecting investor skepticism about the safety of American assets. “The mere possibility that Trump could erode the Federal Reserve’s independence has been enough to unnerve investors and tank the stock market,” Axios reported, warning that an actual attempt to remove Powell could plunge the global financial system into crisis.

The irony is that Trump’s own policies may be driving the economic uncertainty he seeks to alleviate. His tariffs, which Powell flagged as inflationary, have already disrupted markets, with the IMF forecasting a significant global slowdown as a result. Lowering interest rates in this context could exacerbate inflation, a point Powell has underscored by holding rates steady since the Fed’s last cut in December 2024. Inflation, though down from its 9.1% peak in June 2022, remains sticky at 2.4% annually, above the Fed’s 2% target. For Powell, cutting rates prematurely risks reigniting price pressures, a lesson learned from the Fed’s post-COVID missteps when it waited too long to hike rates — a delay that earned Powell Trump’s “Too Late” moniker.

Trump’s fixation on Powell also reflects a personal grudge. He appointed Powell in 2018, expecting a pliant ally, only to chafe when the Fed raised rates to combat inflation. Now, with Powell’s term as chair extending to May 2026, Trump faces a dilemma: endure a defiant Fed chief or risk a legal and market maelstrom by trying to remove him. Some analysts, like Pimco’s Libby Cantrill, doubt Trump will “pull the trigger,” citing the legal fight and market fallout as deterrents. Others, like Eric Salzman at Racket News, predict Trump will keep up the verbal barrage, making Powell’s life “miserable” until his term ends.

The feud has revealed a deeper tension in American governance: the fragile line between democratic accountability and institutional autonomy. The Fed’s independence, although not absolute, has served as a bulwark against short-term political interference, allowing it to make unpopular yet necessary decisions. Yet Trump’s supporters contend that such insulation can slide into unaccountable elitism, a sentiment echoed in posts on X where users celebrate the notion of a president reining in unelected bureaucrats. Critics, however, caution that undermining the Fed’s autonomy could result in spiraling inflation and a loss of global confidence in the dollar, repercussions that would hit ordinary Americans the hardest.

As the Supreme Court considers cases that could expand presidential power over federal agencies, the Trump-Powell showdown may soon test the boundaries of law and precedent. For now, Powell remains a “steady hand,” as one portfolio manager put it, a symbol of stability amid Trump’s tempest. However, stability, in this era of unrelenting disruption, is a fragile thing. The markets, like the nation, are watching, waiting for the next tweet, the next threat, the next move in a game where the stakes are nothing less than the economic future.