President Trump has increased his criticism of Federal Reserve Chair Jerome Powell, calling for immediate interest rate cuts but stating he has “no intention” of firing Powell. Legally, it’s highly uncertain whether Trump could actually remove Powell from office. The Federal Reserve Act allows a president to remove Fed board members only “for cause,” which is generally understood to mean serious misconduct, not policy disagreements. There’s no clear legal precedent for firing a Fed chair over differences in economic policy, and such a move would almost certainly trigger a lengthy court battle, possibly reaching the Supreme Court. Powell and most legal experts maintain that the Fed’s independence is a crucial safeguard for the economy, and undermining it could destabilize financial markets.
If the Fed were to cut interest rates as Trump wants, borrowing would become cheaper for consumers and businesses, encouraging spending on homes, cars, and investments. This could help boost economic growth and support jobs. However, lower rates also mean savers earn less interest, and if the economy is already facing inflation risks, rate cuts could make price increases worse. Trump’s new tariffs complicate the picture even further: tariffs raise the cost of imported goods, pushing up inflation while also potentially slowing economic growth. This puts the Fed in a tough spot, forced to balance the risk of higher inflation from tariffs against the need to support the economy, making decisions about rate cuts even more difficult and politically charged.
Read the article here: https://www.nytimes.com/2025/04/23/us/politics/trump-jerome-powell-fed.html
4 comments:
As Trump pushes the Fed to lower interest rates and a recession looms, do you think Powell should follow the president’s wishes or remain steadfast in what he and the Fed believe is the right course of action?
Although it has been much discussed, it is still crazy to me to watch Trump push inflationary policies repeatedly when assuredly he has been warned of their consequences, and was elected mainly because of a rise of inflation.
The pressure on the Fed is definitely intense. Cutting rates might help growth short term, but with inflation and tariffs, it’s a risky game. Do you think Powell should stand his ground or give in a little?
I feel when people see this they are reminded that our FED operated completely separate from the government, and this little battle highlights Powells over powers to make decisions he feels are necessary.
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