President Donald Trump has intensified his longstanding dispute with the U.S. Federal Reserve, threatening to remove its chair, Jerome Powell, if he does not implement immediate interest rate cuts. This unprecedented move has alarmed economists and market analysts, who warn that undermining the central bank’s independence could destabilize financial markets and weaken investor confidence.
“If I want him out, he’ll be out of there real fast, believe me,” President Trump said on Thursday, making clear his dissatisfaction with Powell’s reluctance to lower rates. Powell, whose term as Fed chair runs through May 2026, has asserted he has no intention of stepping down and emphasized the legal foundations protecting the Fed’s autonomy.
The president’s demand for rate cuts comes as his administration pursues aggressive tariff policies, including a 10% “baseline” levy on most imports. Most economists argue these tariffs are likely to raise prices and slow economic growth precisely the conditions under which the Fed is less likely to cut interest rates.
Stephanie Roth, chief economist at Wolfe Research, noted that while conflict between the White House and the Fed is likely, the central bank is unlikely to yield to political pressure. “They’re not going to react because President Trump posted that they should be cutting,” she said, warning that succumbing to such demands could have disastrous consequences for the U.S. economy.
Legal experts widely agree that President Trump does not have the authority to fire the Fed chair without cause. The Federal Reserve was intentionally structured to operate independently from political influence, a principle that has been key to maintaining monetary stability and global trust in the U.S. financial system.
A pending legal challenge from the administration targeting a 1935 Supreme Court ruling on the president’s powers over independent agencies could, however, change that framework and place the Fed’s independence at risk.
Despite the legal wrangling, economists point to the bond market as the ultimate safeguard. “You can’t control the bond market,” said KPMG’s Diane Swonk. “And that’s why you want an independent Fed.”
As President Trump ramps up pressure, the standoff raises serious questions about the future of U.S. economic policy and the credibility of its financial institutions.
