Trump-Powell feud heats up

Trump's frustration with Powell isn’t new.

Since appointing him in 2017 to replace Janet Yellen, the president has repeatedly criticized Powell for not lowering interest rates fast or far enough. The most recent barrage of attacks came after Powell signaled that the central bank will not rush into cutting rates despite easing inflation and rising political pressure.

“He’s keeping rates too high,” Trump complained during a White House event on April 23. “He historically has been late … he was recommended by a certain person I’m not particularly happy with.”

Trump’s comments followed a string of similar criticisms in prior weeks.

When the European Central Bank cut its key interest rate, Trump demanded that Powell follow suit, saying on social media that the Fed chair “is always TOO LATE AND WRONG.”

Powell, for his part, has maintained the Fed’s independence and downplayed the political noise, telling reporters this past January that he has had “no contact” with Trump. The Fed chair also reiterated that rate decisions will be made based on economic data — not politics.

Powell’s appointment and the Fed’s role

The Fed chair is selected by the president and confirmed by the Senate.

Powell was first confirmed as Fed chair in February 2018 for a four year term, which ended in 2022; he was then reappointed to the position in May 2022. In addition to that, he is a member of the Board of Governors of the Federal Reserve System until 2028 unless he resigns or is removed for cause.

The Fed plays a critical role in US economic stability. Its primary tools include setting interest rates, regulating banks and maintaining price stability and full employment.

Under Powell’s leadership, the Fed aggressively raised interest rates starting in 2022 to combat inflation, which had reached levels not seen in decades. Inflation began to subside by mid-2023 and stood at 2.4 percent as of March of this year. However, the Fed has kept rates at 4.25 to 4.5 percent, citing lingering risks.

What's at stake for the US economy?

Despite Trump’s desire for looser monetary policy, Powell has been backed by economists who argue that the Fed is right to proceed cautiously amid the current economic turmoil.

Interest rates remain well above the near-zero levels of the COVID-19 era, and while inflation has cooled, new risks — such as Trump’s escalating tariffs on Chinese imports — could stoke price pressures again.

Trump has imposed 145 percent tariffs on many Chinese goods, with exemptions for some electronics. He told reporters that tariffs will "come down substantially," but has not announced a timeline.

Meanwhile, major retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT) warned during a White House meeting that tariffs could increase costs for consumers. Even Tesla (NASDAQ:TSLA) CEO Elon Musk, now a senior adviser in the Trump administration, said in a recent earnings call that he will push the president to roll back tariffs.

Powell stands firm — for now

Powell has consistently affirmed that the Fed will base its decisions on data, not presidential pressure.

“The arrangement of central bank independence is very widely understood and supported in Washington, in Congress, where it really matters,” he said during a mid-April speech in Chicago.

Still, the president’s attacks have rattled some on Wall Street, not least because Trump has shown more willingness in this term to test legal and institutional limits. In contrast to Trump's first term, when Powell faced pressure, but never a formal removal threat, today's atmosphere has some investors nervously watching for signs of a deeper standoff.

For now, however, Powell’s job appears safe. Trump’s advisers appear to have convinced him — at least temporarily — that firing Powell would hurt more than help. While the battle over interest rates may continue, Powell looks set to remain at the helm of the US central bank until 2026 — whether the president likes it or not.