President Donald Trump slammed Federal Reserve Chair Jerome Powell on Thursday, reiterating his frustration that the Fed has not aggressively cut interest rates and saying the central bank leader's "termination cannot come fast enough.”
The president's comments come a day after Powell signaled that the Fed will keep its key interest rate unchanged.
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WATCH HEREWhile speaking in Chicago Wednesday, Powell said "we are well positioned to wait for greater clarity" on the impact of policy changes in areas such as immigration, taxation, regulation and tariffs. His comments contributed to a drop in stock prices.
But can Trump fire Powell?
Here's a breakdown:
Who hired Powell?
Powell was initially nominated by Trump in 2017, and he was appointed to another four-year term by President Joe Biden in 2022.
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His term is set to end in May 2026.
Powell started Trump’s second term in a relatively secure spot with a low unemployment rate and inflation progressing closer to the Fed’s 2% target, conditions that could have spared the U.S. central banker from the president’s vitriol.
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SIGN UP But Trump’s aggressive and haphazard tariffs have increased the threat of a recession with both higher inflationary pressures and slower growth, a tough spot for Powell, whose mandate is to stabilize prices and maximize employment. With the economy weakening because of Trump’s choices, the president appears to be looking to pin the blame on Powell.
What did Powell say?
Powell, in his remarks at the Economic Club of Chicago on Wednesday, said the Fed will base its decisions solely on what is best for all Americans.
“That’s the only thing we’re ever going to do," Powell said. “We’re never going to be influenced by any political pressure. People can say whatever they want. That’s fine, that’s not a problem. But we will do what we do strictly without consideration of political or any other extraneous factors.”
The Federal Reserve can stay patient and wait to see how tariffs and other economic policies of the Trump administration play out before making any changes to interest rates, Powell said.
"As that great Chicagoan Ferris Bueller once noted, 'Life moves pretty fast,'" Powell told the Economic Club of Chicago. "For the time being, we are well positioned to wait for greater clarity" on the impact of policy changes in areas such as immigration, taxation, regulation and tariffs, Powell said.
In his prepared remarks, Powell reiterated that the Trump administration's tariffs are "significantly larger than anticipated."
"The same is likely to be true of the economic effects, which will include higher inflation and slower growth," he said.
Powell also repeated that the Fed could face threats to both of the mandates it's been given by Congress, maximum employment and stable prices, which he called a "challenging scenario," because the Fed would essentially have to choose whether to keep interest rates high to fight inflation, or cut them to spur growth and hiring.
Powell said the inflation will likely be temporary, but "could also be more persistent," echoing a concern expressed by a majority of the Fed's 19-member interest rate-setting committee in the minutes of their meeting last month.
What did Trump say?
Trump hinted at moving to fire Powell, whose term doesn’t expire until next year.
“Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS,” Trump said in a social media post.
Referring to the European Central Bank, he added that Powell “should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”
The European Central Bank on Thursday lowered its key interest rate from 2.5% to 2.25%.
Can Trump fire Powell?
At a November news conference, Powell indicated he would not step down if Trump asked him to resign.
He has also said that the removal or demotion of top Fed officials was “not permitted under the law.”
“Our independence is a matter of law," Powell said. "We’re not removable except for cause. We serve very long terms, seemingly endless terms. So we’re protected into law. Congress could change that law, but I don’t think there’s any danger of that. Fed independence has pretty broad support across both political parties and in both sides of the Hill.”
Trump's comments come with the backdrop of a legal case headed to the Supreme Court that could determine whether presidents can fire the heads of independent agencies such as the Fed. Powell said Wednesday he was watching the case.
“A sudden crystallization of the threat to Fed independence would ... intensify market stress,” Krishna Guha, an analyst at investment bank Evercore ISI, wrote on Thursday. “If you liked the tariff debacle in markets, you’d love the loss-of-Fed-independence trade.”
