Donald Trump persists in making remarks that are deemed “unconventional” for American presidents. On April 17, the 47th president of the United States made headline-grabbing remarks concerning the U.S. Federal Reserve and its chair, Jerome Powell.
Trump’s First-Term Fed Tensions
But before discussing Trump’s latest comments, it’s worth noting that his unusual relationship with the Federal Reserve began during his first term in the White House. At that time, Trump tried to interfere with the Fed’s decisions regarding the key interest rate. At the start of his first term, Janet Yellen was the Fed chair. She was unresponsive to Trump’s calls to lower the key rate, which displeased the 45th president. He even threatened to fire her but didn’t follow through and instead waited for her term to end.
In 2018, Jerome Powell—dubbed “Trump’s man”—took over as Fed Chair. But soon it became clear that Powell, like his predecessor, ignored the president’s wishes. Just months into Powell’s tenure, Trump declared he was “unhappy with his choice” for Fed Chair because Powell was raising interest rates “too quickly.”
Even then, during Trump’s first term, observers noted that this kind of behavior toward the Federal Reserve was unprecedented in its over-100-year history. From Woodrow Wilson (who signed the Federal Reserve Act into law in 1913) to Barack Obama, U.S. presidents had respected the Fed’s independence and did not question the decisions made by the Board of Governors.
Powell’s Continued Leadership Under Biden and Trump
Trump left the White House in 2021, and Jerome Powell remained at the helm under President Joe Biden. Trump returned to the presidency in January this year, and Powell is still in office, with his term set to end in May of next year. There were rumors that the 47th president would try to remove Powell early. However, after winning the election, Trump said he would not attempt to do so.
The Interest Rate Dispute
When Trump returned to the White House, the Fed’s key interest rate stood at 4.25–4.5% annually. At the latest FOMC (Federal Open Market Committee) meeting in late January, the rate remained unchanged. The decision has already drawn criticism from Trump, who wants the rate to be lowered. On social media, he wrote that the U.S. central bank “failed to solve the problem it created.” Trump asserts that the high key rate is the cause of inflation in the American economy. While he cannot yet directly influence interest rate decisions (which he insists must be drastically lowered), he said he would fight inflation by other means.
As per Trump’s post, since Jay Powell and the Fed failed to prevent inflationary issues—which they themselves created—he intends to solve them himself. This will happen through increased American energy production, deregulation, balancing international trade, and rebooting U.S. manufacturing.
Tariffs and Fed Policy
Trump asserts that the need to combat inflation in the U.S. is a contributing factor to the drastic hike in import tariffs currently under discussion worldwide. According to him, one reason for his aggressive tariff policy is the perceived inaction or harmful actions of the Federal Reserve.
Ideally, Trump would like to change the “rules of the game” so that the U.S. president would have a full say in Fed decisions. During last year’s campaign, Trump told reporters that he “firmly” believes presidents should have “at least a voice” in Fed policy-making, calling for the repeal of the ban on presidential participation in setting Fed policy.
The April 17 Controversy
Now to Trump’s most recent remarks on April 17. Jerome Powell’s comments on April 16 at the Economic Club in Chicago apparently triggered Trump’s remarks. Powell brought up Trump’s import tariffs, saying they were “significantly higher than expected,” and cautiously warned of potential negative economic impacts, including “higher inflation and slower growth.” In plain terms, Powell implied that the Fed would wait for more clarity before considering rate cuts.
Trump reacted immediately. On social media, he furiously expressed his disappointment in Powell, whom he expected to announce rate cuts. Referring to Fed data, Trump wrote that, essentially, there is no inflation. He noted that crude oil and petroleum product prices are falling. Everything has dropped—except interest rates, Trump continued. So why haven’t interest rates fallen? Trump claimed it was because the Federal Reserve Chair is influenced by politics. He sarcastically nicknamed Powell “Mr. Too Late.”
Trump’s Comparison to the ECB
Trump often cites the ECB, which has already lowered rates several times. He wrote in another post that he expects the European Central Bank (ECB) to cut interest rates for the seventh time. Meanwhile, ‘Slow’ Jerome Powell of the Fed, who’s always late and wrong, made another sloppy statement. Oil prices are falling, food prices (even eggs!) are dropping, and the U.S. is making money on tariffs. Powell should have cut rates long ago like the ECB—and must cut them now. Powell’s resignation is long overdue.
Incidentally, the ECB did cut its interest rate by a quarter point to 2.25% just hours after Trump’s statement. That’s now half of the Fed’s rate.
The Threat of Removal
After his social media post, reporters in the Oval Office asked Trump about Powell. He responded, “If I ask him to leave, he’ll be gone.” And he added that he is not happy with Powell, and he has made that known.
So, Trump has gone back on his promise to let Powell finish his term. Only one year remains! But can Trump actually do it? Abruptly, the “Humphrey precedent” resurfaced, tracing its history back precisely 90 years. In 1935, the U.S. Supreme Court ruled in Humphrey’s Executor v. United States that President Roosevelt could not remove a Federal Trade Commission commissioner. The court found such removals unconstitutional, and the ruling has since been interpreted to mean that heads of independent agencies, including the Fed, have protection from dismissal.
The Weakening “Humphrey Precedent”
However, in recent months, the “Humphrey precedent” seems to be weakening. The Trump administration has already removed senior officials from the FTC, the National Labor Relations Board, and the Merit Systems Protection Board. It’s possible that the Fed Chair could be next.
Interestingly, Powell himself commented on the “Humphrey precedent” during the April 16 event in Chicago. He said there’s a Supreme Court case, and people probably have read it, Powell said at the Economic Club meeting. People frequently discuss this case. Powell said he does not think it applies to the Fed, but he added that he wasn’t sure. He said it’s a situation the Fed is watching closely. He reiterated that the Fed’s independence is a matter of law and that the Fed’s charter states the chair cannot be removed without cause.
So if Powell is removed before his term ends, it would be a major precedent, effectively nullifying the “Humphrey precedent” and stripping the Fed of its former independence.
Supporters and Critics of Fed Independence
Trump’s challenge to the Fed’s “independence” has both supporters and critics. One supporter, even more radical than Trump, is Elon Musk. In November last year, shortly after Trump’s election win was announced, Musk endorsed anti-Fed Senator Mike Lee of Utah, who has long argued not only for limiting the Fed’s independence but for abolishing it altogether, claiming it violates the Constitution. Senator Lee asserted that the US Constitution establishes presidential control over the executive branch. The Fed is an example of how the US has drifted from the Constitution. That’s why the US must abolish the Fed. Musk echoed these sentiments with “End the Fed.”
Wall Street’s Defense of Fed Independence
But strong defenders of the Fed’s independence remain—chiefly Wall Street bankers. Nathan Sheets, the chief economist at Citigroup Inc., cautioned that the U.S. could face a serious threat if we surpass the threshold of central bank independence, in addition to Trump’s high tariffs and other unconventional measures.
Democratic Senator Elizabeth Warren firmly defended Jerome Powell and the Fed in an interview, saying that the president has free speech, like anyone else, but he doesn’t have the authority to fire Jerome Powell. If he tries, markets will crash. She added that even dictatorships try to establish a central bank independent from the president to attract capital, implying Trump has authoritarian tendencies.
David Wilcox, U.S. director of economic research at Bloomberg Economics, stated that if the Supreme Court overturns the 1935 precedent, it will reduce the Fed’s rating on Bloomberg’s index measuring central bank independence. If that happens, the Fed will become the only G-7 central bank to lose legal independence for reasons unrelated to banking oversight. His words sound like a stern warning to Trump.
Potential Successors to Powell
Current Treasury Secretary Scott Bessent seems to be trying to straddle both sides. Regarding the Fed’s independence in monetary policy, he cautiously sided with the central bank, likening its independence to “a jewel box that must be preserved.”
American media is also actively speculating about who might replace Powell. Trump’s top pick for the job is Kevin Warsh. He studied public policy in economics and statistics at Stanford, earned a law degree from Harvard, and began his career at Wall Street’s Morgan Stanley. From 2006 to 2011, he served on the Federal Reserve Board. During and after the 2008 financial crisis, Warsh was the main liaison between the Fed and Wall Street banks, and he represented the Fed in the G20.
However, there is one caveat in the views of those who believe Warsh will become Fed Chair. Warsh exhibits a very cautious attitude toward cryptocurrencies — unlike Trump, who is betting on Bitcoin and other private digital currencies.