President Donald Trump renewed his call for the Federal Reserve to cut interest rates, saying Fed Chair Jerome Powell’s “termination cannot come fast enough.”
In a Truth Social post on April 17, Trump urged the Federal Reserve to emulate the European Central Bank (ECB) and follow through on rate cuts as prices are down and “the USA is getting rich on tariffs.”
“Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’” Trump said. “Powell’s termination cannot come fast enough.”
At the April policy meeting, the ECB announced another quarter-point interest-rate cut, the seventh reduction since June 2024. The institution has attempted to bolster the bloc’s growth prospects and cushion potential tariff-driven economic blows.
This month, Trump has revived his critical comments against Powell.
Trump wrote in an April 4 Truth Social post that it would be “a perfect time for Fed Chairman Jerome Powell to cut interest rates.”
“He is always ‘late,’ but he could now change his image, and quickly,” Trump said. “Cut interest rates, Jerome, and stop playing politics!”
Powell said on April 16 that the new administration is engaging in “very fundamental policy changes” that could put the central bank in uncharted waters. While Powell stopped short of referencing stagflation, the Fed chief noted that the larger-than-expected sweeping tariffs could boost inflation and slow growth.
This, Powell says, would put the Fed in a dilemma between supporting the economy and tackling inflation.
“If that were to occur, we would consider how far the economy is from each goal, and the potentially different time horizons over which those respective gaps would be anticipated to close,” he stated at an event hosted by the Economic Club of Chicago.
However, since monetary policy is in a good position, Powell believes he and his colleagues can wait for greater clarity before taking action.
The Fed chair’s speech and follow-up question-and-answer session triggered a selloff in the financial markets.
Investors think policymakers will keep the institution’s rate-cutting cycle on hold for the fourth consecutive meeting in May. According to the CME FedWatch Tool, the futures market anticipates the Fed will restart its easing agenda at the June meeting with a quarter-point rate cut.
Powell on the Chopping Block
Meanwhile, it is the first time as president that Trump has hinted at Powell’s termination.
Despite Trump’s criticisms of the central bank head on the campaign trail, he and other administration officials eventually agreed that he would allow Powell to complete the remainder of his term.
“As the president said on Sunday, and I’m in complete agreement with him, that Jay Powell will serve out his term,” then-Treasury Secretary nominee Scott Bessent told CNBC in December.
He also stated that he does not fear Trump firing Powell or challenging the central bank’s independence.
“I’ve repeatedly said the Fed has two duties, and I believe that monetary policy is a jewel box that’s got to be preserved,” Bessent said. “And then they have regulatory policies. And I think we can have more of a discussion, because the Fed is one among three bank regulators. There’s the Fed, Comptroller of the Currency, and the FDIC. So I think it’s very easy to delineated between the two.”
Financier Kevin Warsh is considered a top contender to replace Powell next year. Warsh was a heavy favorite for the position in 2018 and a candidate for Trump’s second-term Treasury secretary.
“The markets would be very comfortable with Kevin Warsh as the Fed chair. He has tremendous experience. He understands the markets, he understands economics,” top economist Mohamed El-Erian said in an April 17 interview with “Bloomberg Surveillance.”
El-Erian also believes Bessent’s previous proposal of pre-announcing a new central bank chief could play out.
Last year, Bessent floated the idea of having Trump nominate a “shadow Fed chair” and obtain Senate confirmation of Powell’s replacement.
“And based on the concept of forward guidance, no one is really going to care what Jerome Powell has to say anymore,” the seasoned Wall Street veteran billionaire told Barron’s in October.
Soon after, during an interview on Bloomberg Radio, he reiterated this plan, which is based on British politics of the opposition appointing a shadow cabinet to espouse policy alternatives.
“If you believe forward guidance is good, why can’t you give forward guidance on who the Fed chair is going to be?” Bessent said. “You could do one of two things: the current Fed chair could be reappointed, so you’ve created a path there, or the new Fed chair nominee would give forward guidance beyond the current Fed chair’s sell-by date.”
Powell told reporters at the November post-meeting press conference that firing him is “not permitted under the law.”
Warsh, a distinguished visiting fellow at the Hoover Institution, has been critical of the central bank’s policy decision-making, telling CNBC’s “Squawk Box” that the Fed keeps shifting the goal posts on inflation.
“The central bank needs to be very clear about its reaction function, be clear about its goals, and not look like it’s lurching because that’s what put us in the mess we have,” Warsh said in October.
