The Fed's Independence Under Pressure: Trump's Mixed Signals on Powell's Future

In a reversal that underscores ongoing tensions between the White House and the Federal Reserve, President Trump has publicly stated he holds “no intention” of removing Federal Reserve Chair Jerome Powell—a remarkable pivot from his recent inflammatory rhetoric. Just days earlier, Trump had posted on Truth Social that “Powell’s termination cannot come fast enough” and labeled the Fed Chair a “major loser,” signaling an aggressive campaign to force rate cuts.

Trump’s Shifting Tone Masks Deeper Conflict

When questioned by reporters on Tuesday, Trump claimed the media had “run away with things,” insisting “I never did” plan to dismiss Powell, whose tenure as Fed Chair extends through May 2026. Yet this latest statement contradicts his Friday declaration that Powell could be removed “real fast, believe me,” underscoring the volatility of the administration’s messaging on monetary policy.

Trump’s frustration centers on Powell’s resistance to aggressive interest rate cuts. “I would like to see him be a little more active in terms of his idea to lower interest rates,” Trump remarked, revealing that his stated non-firing position masks continued pressure on the central bank’s policy direction.

The Catalyst: Trade Policy and Inflation Concerns

The escalation stems from Powell’s assessment that Trump’s trade policies threaten to accelerate inflation while dampening economic growth. The Fed maintained rates unchanged last week, a decision that rankled the president. Trump’s economic adviser Kevin Hassett even signaled the administration was examining whether it possessed legal authority to remove Powell—a suggestion that sparked immediate pushback from Capitol Hill.

Republican Allies Question Presidential Power

Senator John Kennedy (R-LA) directly challenged Trump’s authority over the Fed Chair, asserting: “I don’t think the president, any president, has the right to remove the Federal Reserve chair.” Kennedy emphasized that central bank independence represents a cornerstone of sound economic governance.

Minneapolis Fed President Neel Kashkari reinforced this position, stressing that autonomy from political interference remains “the foundation for a strong economy.” He cautioned that determining the trajectory of future rate adjustments remains premature given current economic conditions.

Market Reaction Reflects Uncertainty

The intensifying rhetorical battle rattled financial markets. Stock indices declined Monday as investors grew concerned about potential erosion of the Fed’s institutional independence. This volatility reflects broader anxiety that politicization of monetary policy could destabilize economic conditions.

The Fed’s Steadfast Stance

Powell has maintained his resolve to serve his complete term, dismissing speculation that pending legal proceedings would influence the Federal Reserve’s operations. Fed Governor Adriana Kugler signaled a cautious approach to inflation risks, committing to maintain current policy rates as long as upside inflation pressures persist alongside stable employment and economic activity.

Kugler specifically highlighted the inflationary threat posed by tariff increases implemented this year, warning that tightening financial conditions could pose future headwinds to growth. “The economy is facing heightened uncertainty,” she cautioned, underscoring the Fed’s concerns about the policy environment ahead.