President Trump on Monday renewed his call for the Federal Reserve to cut interest rates and continued his attacks on Fed Chair Jerome Powell, who last week warned that Trump’s tariffs have been larger than expected and are “highly likely” to cause at least a temporary rise in inflation.
In a social media post Monday morning, Trump argued that inflation has been tame and pressed for the central bank to lower rates to prevent a possible economic slowdown.
“’Preemptive Cuts’ in Interest Rates are being called for by many,” Trump wrote, adding that “there is virtually No Inflation.” He then lobbed personal attacks against Powell. “With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump wrote. “Europe has already ‘lowered’ seven times. Powell has always been ‘To Late,’ [sic] except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?”
Trump appointed Powell during his first term as president, but he has repeatedly attacked the Fed chief and said recently that his “termination cannot come fast enough.” Powell’s term as Fed chair expires in May 2026, but Trump and his team are reportedly investigating whether he can fire Powell before then.
The Fed was created as an independent entity, able to set interest rates removed from politics, at least in theory. Powell has insisted that the president cannot fire him as a matter of law and has said he will not resign, but Trump has already pushed the legal bounds by firing officials at other independent agencies, triggering a case now before the Supreme Court. The administration is challenging precedents barring the president from firing certain federal employees for purely political reasons. Powell told reporters last week he does not think that case will apply to the Fed.
Doubts about the US and the dollar: Investors already worry that the president’s trade war might lead to a recession, and they have begun to raise questions about the U.S. status as a safe haven. Trump’s latest attacks on Powell spooked investors again, fueling another market plunge. The S&P 500 index fell 2.36% on the day and the dollar hit its lowest level since 2022, with some market analysts warning that any action by Trump to remove Powell would rattle markets further and add to the economic and fiscal hazards from his policies.
“Any reduction in the independence of the Fed would add upside risks to an inflation outlook that is already subject to upward pressures from tariffs and somewhat elevated inflation expectations,” J.P. Morgan economist Michael Feroli wrote in a note to clients. “Moreover, market participants would likely demand greater compensation for inflation and inflation risks, thereby increasing longer-term interest rates, weighing on the outlook for economic activity and worsening the fiscal position.”
Even just raising the idea of firing Powell comes at a cost. “Trump’s musings on the potential for firing Fed Chair Powell, even if such thoughts don’t come to fruition, do in the minds of the international community constitute a substantial threat to the independence of the U.S. central bank and by extension the status of the dollar as a safe haven currency,” Monex foreign-exchange trader Helen Given told Bloomberg. “Should the U.S. fall into a recession with a central bank that either does not or cannot act independently, there’s a chance such a downturn could be exacerbated, giving markets even more reason for concern.”