Why Trump’s attacks on Jerome Powell are raising fears for the US economy

United States President Donald Trump has spent months attacking US Federal Reserve president Jerome Powell for not moving faster to lower interest rates.

While Trump is not the archetypal president to clash with the caput of the US cardinal slope connected monetary policy, helium has gone further than his predecessor by threatening to occurrence Powell and pressuring him to resign.

Trump’s barbs person raised concerns astir the imaginable of the Fed losing its independence, which would person superior ramifications for the US economy.

What has Trump said astir Powell?

Trump’s main gripe with Powell has been the Fed’s determination to support its benchmark involvement complaint successful the scope of 4.25 to 4.50 percent.

The US cardinal slope has resisted calls to little the rate, which would spur economical maturation by reducing borrowing costs crossed the economy, to support a lid connected inflation.

While ostentation remains humble astatine present, Powell and his colleagues fearfulness that prices could emergence importantly successful the coming weeks and months owed to Trump’s tariffs.

Trump has argued that the complaint should beryllium arsenic debased arsenic 1 percent.

Trump has been astatine likelihood with Powell since his archetypal term, erstwhile helium nominated him to the apical job, but the president began ramping up his attacks successful April, erstwhile helium branded the monetary argumentation main “a large loser” and “numbskull” whose “termination cannot travel accelerated enough”.

Since then, Trump has made conflicting remarks astir whether helium intends to occurrence Powell, and past week asked a radical of Republican lawmakers for their sentiment connected the matter.

While Trump continues to blast Powell connected societal media, different apical White House officials person joined the condemnation.

Earlier this month, Office of Management and Budget Director Russell Vought accused Powell of mishandling the “ostentatious” $2.5bn refurbishment of the Fed’s office successful Washington, DC.

On Tuesday, US Treasury Secretary Scott Bessent accused the Fed of “persistent mandate creep into areas beyond its halfway mission” and called for a reappraisal of the renovation project.

Today successful a CNBC interview, I called for a reappraisal of the Federal Reserve. It is my content that the cardinal slope should behaviour an exhaustive interior reappraisal of its non-monetary argumentation operations. Significant ngo creep and organization maturation person taken the Fed into areas that…

— Treasury Secretary Scott Bessent (@SecScottBessent) July 21, 2025

Does Trump person the powerfulness to region Powell?

The Fed seat is harder to region than the heads of different autarkic authorities agencies.

Under the Federal Reserve Act of 1913, the president whitethorn region the caput of the cardinal slope “for cause” – wide interpreted to mean impervious of corruption oregon malfeasance.

A landmark 1935 Supreme Court ruling further insulated the Fed from governmental unit by explicitly stating that the heads of autarkic agencies cannot beryllium removed without cause.

David Wilcox, a elder chap astatine the Peterson Institute for International Economics who served connected the unit of the Federal Reserve Board, said the Trump Administration appeared to beryllium zoning successful connected the Fed’s renovation task to make a pretext to occurrence Powell.

“The mode they’re doing that is they’re drumming up a batch of contention astir the expenses that person been incurred and volition beryllium incurred successful the renovation of 2 of the historical buildings,” Wilcox told Al Jazeera.

“The drumbeat of disapproval seems to beryllium that Powell allegedly has mishandled this situation, and interest is that this precise small-scale concern mightiness beryllium someway blown up into an excuse for firing Powell ‘for cause’.”

Is determination immoderate precedent for Trump’s run against Powell?

In the precocious 1960s and aboriginal 1970s, presidents Lyndon B Johnson and Richard Nixon – a Democrat and a Republican – some famously exerted unit connected the Fed seat to support involvement rates low.

Some historians person theorised that Nixon’s cajoling of then-Fed seat Arthur Burns stopped him from rolling retired complaint hikes that could person halted the emergence of double-digit ostentation successful the mid-1970s.

“What does compromising cardinal slope independency do? It runs the anticipation of giving immoderate benignant of short-term summation for semipermanent pain,” Mark Spindel, the CIO of Potomac River Capital and a Federal Reserve historian, told Al Jazeera.

“And politicians person abbreviated memories.”

Construction enactment is carried retired the the US Federal Reserve gathering successful Washington, DC, connected July 14, 2025 [Jonathan Ernst/Reuters]

How volition markets respond if Powell is removed?

Suggestions that Trump could region Powell person roiled markets connected respective occasions.

On Wednesday, the benchmark US S&P 500 concisely fell by 0.7 percent, and the US dollar sank 0.9 percent, pursuing reports that Trump had asked Republican lawmakers whether helium should occurrence the Fed chair.

Stocks recovered a abbreviated clip aboriginal aft Trump denied that helium had immoderate plans to region Powell, the latest illustration of what investors person dubbed the “TACO Trade” – abbreviated for “Trump Always Chickens Out”.

If Trump were to travel done connected his menace to region Powell, the banal marketplace and assurance successful the US system would instrumentality a large hit, Wilcox said.

“It would astir apt beryllium reflected successful an summation successful the expected ostentation that’s built into borrowing rates. It would beryllium reflected successful an summation successful the hazard premiums that are built into semipermanent Treasury rates,” helium added.

“It would astir apt beryllium reflected successful a weakening of the US dollar due to the fact that of a nonaccomplishment successful assurance that would travel from the knocking down of yet 1 much signature facet [of the economy] that has been taken for granted for galore decades.”

Why mightiness Trump not privation to occurrence Powell?

Fed historiographer Spindel said Trump whitethorn yet determine to support Powell contempt his threats.

The Fed chairman’s word expires successful May adjacent year, Spindel said, and, until then, Trump tin usage Powell arsenic a scapegoat for immoderate problems with the economy.

As a businessman, Trump besides considers the banal marketplace an important barometer of success, Spindel added.

“The marketplace is an important politician connected his policies,” helium said.

“He has a ample constituency successful the firm sector. He evidently enjoys enactment from the mediate and precocious affluent class, and helium doesn’t privation to torpedo the equity market.”