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Trump–Powell conflict

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Donald Trump
Jerome Powell

In July 2018, U.S. president Donald Trump began a conflict with Federal Reserve chairman Jerome Powell, whom he nominated to the position in November 2017.

Background

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Federal Reserve independence

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Since the presidency of Bill Clinton, presidential administrations have largely avoided discussing decisions carried out by the Federal Reserve in order to ensure its independence.[1] The Federal Reserve was chaired by the secretary of the treasury from its establishment in 1913 to 1935 amid the Great Depression and given the autonomy to determine monetary policy during the Korean War. Prior presidents had sought to lower interest rates by targeting the chair of the Federal Reserve. Lyndon B. Johnson objected to interest rate increases in 1965, leading to concerns from chairman William McChesney Martin. Richard Nixon successfully forced Arthur F. Burns to lower rates ahead of the 1972 presidential election, leading to high inflation. The 1973–1975 recession and the early 1980s recession prevented several presidents from pressuring the Federal Reserve to lower interest rates. George H. W. Bush—having presided over the early 1990s recession—criticized monetary policy in an interview with The New York Times in 1992.[2]

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The amended Federal Reserve Act allows the president to remove a Federal Reserve governor, but only "for cause"; Peter Conti-Brown, a University of Pennsylvania professor, argued to The Wall Street Journal that the definition of "for cause" has been interpreted to the standard of "inefficiency, neglect of duty or malfeasance in office" as affirmed by Humphrey's Executor v. United States (1935). Lawyers who advised Lyndon B. Johnson noted that he could not remove William McChesney Martin over Martin's decisions. In PHH Corp. v. CFPB (2018), judge Thomas B. Griffith argued that Humphrey's Executor allowed presidents to dismiss officials for "ineffective policy choices". The applicability of "for cause" to the chair of the Federal Reserve is unclear.[3] As chair of the Federal Reserve, Jerome Powell is additionally the chair of the Federal Open Market Committee, a central bank component that determines open market operations. The president has no jurisdiction over the committee.[4]

Conflict

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First presidency (2018–2021)

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Trump (right) and Powell (left) in the Oval Office in November 2017

President Donald Trump nominated Jerome Powell to serve a four-year term as chair of the Federal Reserve in November 2017;[5] he assumed the position in February 2018.[6] His tenure began with an effort to argue for the independence of the Federal Reserve and to avoid criticism from Trump. In July, Trump said in a CNBC interviewed that he was "not thrilled" at Powell for raising interest rates.[6] He continued his criticism of Powell through August, reiterating to Reuters that he was still "not thrilled" with interest rate increases.[7] In an interview with Bloomberg News, Trump said that he did not regret appointing Powell.[8] In October, Powell said he was focusing on "controlling the controllable" at The Atlantic Festival.[9] At a press conference that month, Trump decried the Federal Reserve as "crazy", "loco", and said that it had "gone wild" with interest rate increases, leading to concerns that Trump could attempt to dismiss Powell;[10] Trump rejected that claim.[11] The Federal Reserve disregarded the comments, according to Politico. Steven Mnuchin, the secretary of the Treasury, and Larry Kudlow, the director of the National Economic Council, downplayed Trump's remarks.[10] That month, Axios reported that Trump would not cease his insults against Powell, citing the belief that Powell would eventually lower rates.[12] Trump told The Wall Street Journal that he "maybe" regretted appointing Powell and accused him of taking pleasure in increasing interest rates.[13]

In November, Trump said he was displeased with Powell in an interview with The Washington Post, attributing him to a stock market decline and layoffs at General Motors.[14] After Powell announced another interest rate increase the following month, Trump asked advisors if he could legally fire Powell;[15] according to Bloomberg News, the Office of White House Counsel examined the request in February 2019.[16] The New York Times reported that Trump had privately compared his legacy to Herbert Hoover with Powell's decisions[17] and that he had told Stephen Moore, an economist for The Heritage Foundation, that appointing Powell was "one of the worst choices" he had made.[18] In January 2019, Powell said he would not resign if asked to do so by Trump.[19] Powell was present at a dinner at the White House with Trump, Mnuchin, and vice chair Richard Clarida in February.[20] Trump continued to pressure Powell through April,[21] including by announcing that he would nominate Moore and Herman Cain, a businessman and politician, to the Board of Governors.[22] Trump renewed his criticism in June, appearing to praise the People's Bank of China's absence of independence.[23] After Bloomberg News reported on the White House Counsel's assessment on firing Powell that month, Trump left open the possibility of removing him.[24] As Trump asserted that he gave Powell prominence,[25] he believed that he had the authority to fire Powell, according to Bloomberg.[26]

Powell's interest rate strategy retained support from several Republican senators, including Pat Toomey of Pennsylvania and Richard Shelby of Alabama.[27] After Powell said that the China–United States trade war caused uncertainty for the central bank in August, Trump questioned if Powell or Chinese president Xi Jinping was a greater "enemy" of the United States.[28] Internal emails obtained by The New York Times showed concern within the Federal Reserve, though comments made by North Dakota senator Kevin Cramer, a Republican, were widely disseminated, including to Powell.[29] Trump's trade policies are believed to have forced the Federal Reserve to lower interest rates, according to Politico.[30] The following month, Trump urged Powell to lower interest rates to "zero, or less".[1] Powell continued to value the importance of an independent Federal Reserve at the premiere of Marriner Eccles: Father of the Modern Federal Reserve in October, a film about the late chairman Marriner S. Eccles.[31] That month, he signaled that the Federal Reserve would not reduce interest rates indefinitely.[32] Appearing before the Congressional Joint Economic Committee in November, Powell publicly rebuked a negative interest rate as "certainly not" appropriate.[33] That month, Trump and Powell, joined by Mnuchin, met at the White House, where Powell stated that the Federal Reserve would remain "nonpolitical".[34]

In March 2020, amid initial onset of the COVID-19 pandemic in the United States, Trump repeated his claim that he could fire Powell,[35] though he tempered his comments afterwards.[36]

Post-presidency (2021–2025)

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In February 2024, Trump told Fox Business that he would not re-appoint Jerome Powell—a perceived "political" actor—to a third term as chair should he be elected president for a second, non-consecutive term.[37] In an apparent affront to Trump's rebuke of the Federal Reserve's independence, Powell stated that the Federal Reserve was "working to serve all Americans" in an interview with Marketplace's Kai Ryssdal.[38]

Second presidency (2025–present)

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Trump began his second term by continuing the conflict, claiming that Powell and the Federal Reserve for failing to lower inflation in January 2025.[39]

In July, Politico reported that Russell Vought, the director of the Office of Management and Budget, was investigating a US$2.5 billion renovation to the Eccles Building that could serve as the basis for a "for cause" removal.[40]

Responses

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Economic

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A working paper from researchers from Duke University and the London Business School found that Trump's tweets criticizing the Federal Reserve and Powell had a "statistically significant and negative effect" on markets, decreasing a cumulative ten basis points off of expected futures contracts for federal funds and suggesting that markets did not anticipate the independence of the Federal Reserve to hold.[41]

Jamie Dimon, the chief executive of JPMorgan Chase, argued for the independence of the Federal Reserve in his earning call to investors in July 2025.[42]

Congressional

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Ohio senator Bernie Moreno began recruiting other senators to call for Powell's resignation, including Tommy Tuberville of Alabama and Rick Scott of Florida, in July 2025. Louisiana senator John Kennedy told Axios that he valued the independence of the Federal Reserve.[43]

References

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  1. ^ a b Smialek 2019c.
  2. ^ Puzzanghera 2018a.
  3. ^ Timiraos 2018.
  4. ^ Savage 2019.
  5. ^ Swanson & Appelbaum 2017.
  6. ^ a b Guida 2018a.
  7. ^ Guida 2018b.
  8. ^ Micklethwait, Jacobs & Talev 2018.
  9. ^ Graham 2018.
  10. ^ a b White 2018.
  11. ^ Puzzanghera 2018b.
  12. ^ Swan 2018.
  13. ^ Bender et al. 2018.
  14. ^ Rucker, Dawsey & Paletta 2018.
  15. ^ Jacobs, Mohsin & Talev 2018.
  16. ^ Mohsin & Jacobs 2019.
  17. ^ Baker & Haberman 2018.
  18. ^ Appelbaum 2018.
  19. ^ Guida 2019a.
  20. ^ Timiraos 2019a.
  21. ^ Lee 2019.
  22. ^ Cassidy 2019.
  23. ^ Smialek 2019a.
  24. ^ Long 2019.
  25. ^ Smialek 2019b.
  26. ^ Jacobs & Mohsin 2019.
  27. ^ Timiraos 2019b.
  28. ^ Greeley 2019.
  29. ^ Smialek 2020a.
  30. ^ Guida 2019b.
  31. ^ Kiernan 2019.
  32. ^ Guida 2019c.
  33. ^ Telford 2019.
  34. ^ Sevastopulo & Rocco 2019.
  35. ^ Smialek 2020b.
  36. ^ Sink, Waters & Boesler 2020.
  37. ^ Goodman 2024.
  38. ^ Smialek 2024.
  39. ^ Guida 2025.
  40. ^ Sutton 2025.
  41. ^ Kennedy 2019.
  42. ^ Goldfarb & Timiraos 2025.
  43. ^ Nichols 2025.

Works cited

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