President Trump is focused on the Federal Reserve and is setting up a fight against leader Jerome Powell.
The president is eager to speed up planned interest rate cuts and ease pressure on the economy as the Fed deepens concerns about his trade agenda. The Fed is preparing for a potential price shock driven by Trump's tariffs.
Trump has so far only shown mild nuisance to the Fed. He bagged the central bank after curbing interest rate cuts on Wednesday, but he stifled the direct threat.
But as the White House seeks to become independent of the agency, Powell will rarely be kicked out if tensions with the White House end up scoring key points before next year.
Ian Katz, director of Washington research firm Capital Alpha Partners, said he doesn't expect Trump to try to fire Powell.
Still, Katz warned, “Nothing can be eliminated given this term, given how aggressive Trump, who so far has been as an authority.”
Trump took aggressive steps to increase control of the federal government and restructure it along his political whims. The Trump administration has pushed massive cuts to large institutions, kicking out thousands of non-political employees.
The Trump administration has also imposed new rules on independent agencies, requiring that the proposed regulations be submitted to the White House for review before they are published.
Trump and top economic officials say their attempts to influence the Fed are limited to regulatory oversight by major banks, rather than managing monetary policy. But the president nevertheless tweaked the Fed to cut interest rates amid growing concerns over the country.
Trump claims that it will double by squeezing the Federal Reserve to cut interest rates, and that central banks can cut food costs, specifically eggs and gas.
“Grocery prices are generally lower, energy prices are falling, and we hope the Fed will lower interest rates, and we will see the rates fall,” Trump said at a cabinet meeting on Monday after posting to the Truth Society that interest rates need to be posted multiple times.
However, when the Fed announced Wednesday it was stable in the 4.25% to 4.5% range, Powell said Trump's tariff plans are likely to halt bank progress when defeating inflation.
“I think once tariff inflation arrives, further progress may be delayed,” Powell said.
He noted that the new Fed economic forecast released on the same day “doesn't show any further downward progress on inflation this year, and that's really due to tariffs.”
Powell also described economic uncertainty as an “abnormal rise,” which poses a challenge to the Fed to stay ahead of potential price increases.
Meanwhile, Trump is ahead of the line next month with plans to impose new mutual tariffs. The president mentioned on April 2 when trading partners vowed to fit the tariffs that promoted products from the United States as “liberation day” in order to promote fairness.
Trump's tariff orders before and after are deepening concerns about the state of the US economy, and could have ultimately led the Fed to cut interest rates at a faster pace.
The Fed is expected to cut interest rates twice this year, and after stabilizing on Wednesday, it predicted two cuts on Wednesday.
But President Rafael Bostic of the Federal Reserve Bank of Atlanta said in an interview Monday with Bloomberg News that Trump's tariffs would delay those efforts. He now supports one cut this year after asking for two previously.
“The right paths of policy will also be pushed back,” Bostic said.
Meanwhile, Trump defended his upcoming tariffs on Monday as a way to further improve the economy.
“I want to see the Fed's low interest rates. That's my opinion, because things are falling. We have inflation under our control and there's a huge amount of money involved right away.
The president, who is considering the decision of the Fed, an independent agency, comes when he rejects two Democrats from the Federal Trade Commission (FTC) and raises new questions about the future of independent agencies.
The underlying concerns about whether the Trump administration could fire the FTC commissioner is Humphrey's Enforcer v, a 1935 Supreme Court decision.
When asked by the Supreme Court whether the ultimate goal of an FTC firing was to overturn the ruling, White House press chief Karoline Leavitt said last week, “It was to let go of these individuals.” [If we have] We will be certain to fight all the way to the Supreme Court. ”
Powell's term ends in 2026, and he said in November that he would not resign before, even if Trump asked him to do so. He added that at the time it was “not permitted under the law” for the president to fire or demote him or any other federal governor in leadership positions.
President Trump told Powell last summer he would offer his term “if you think he's doing the right thing,” but he said he wouldn't re-appoint him for another term.
Sources close to the White House said it could be that Trump is about to fire Powell, but suggested that the White House is also considering their options.
“I don't think Jerome Powell will leave his own will. I think Trump might try to fire him, but I think it's impressive that Jerome Powell will not leave spontaneously, sources said.
If he attempts to fire Powell before a potential Supreme Court decision, Humphrey's executors attempt to reconsider what is likely to surprise the financial world and lead to a sudden stock market sale.
“I doubt that [Trump has] “This is not a court battle for you to win, and that it can really upset the market,” Katz said.
“The markets will have some concern about the ruling that the president will have more influence on monetary policy,” Katz added. “I don't think the market loves it.”
The White House said it had no announcement when the administration asked for comment on whether it believes it has the power to fire Fed officials following the removal of the two FTC commissioners, and when Trump planned to allow Powell to finish his term.
“President Trump's economic agenda has stopped the destruction of inflation, reduced mortgage rates, brought historic investments, and leveled the arenas for American companies. At this time, there are no new personnel announcements,” spokesman Taylor Rogers said.
