President Donald Trump speaks to the media during the annual roller of Easter eggs in the White House, on the southern lawn of the White House in Washington, DC, United States, April 21, 2025.
Leah Millis | Reuters
Public criticisms of President Donald Trump with regard to the president of the Fed, Jerome Powell, are concerned with ensuring that the head of the central bank is the head of the central bank, but even this historic and legally questionable decision may not be sufficient for Trump to fold the monetary policy in his favorite direction.
Even Powell dismissal will not necessarily have reductions in prices he wants, according to several economists.
“In all likelihood, Powell’s dismissal would only be the first step in dismantling the independence of the Fed. If Trump is dropping interest rates, he will also have to draw the other members of the Fed board of directors, which would trigger a more severe backlash on the market, with the drop in the dollar and the economy of North America at the end of the economy of the yield curve,” said Paul Ashworth, North America chief in the capital economy, in a recent note.
Powell is chairman of the Governors of the Fed and the Federal Open Markets Committee, which establishes an interest rate policy. Ashworth stressed that, while FOMC members generally choose to ensure that the President of the Council of Governors appointed by the President directs them, they can complete and choose someone else as head of the rate fixing committee. And the United States US economist of JPMorgan, Michael Feroli, said in a note that “most of the power of leadership stems from historical deference” rather than real work mechanics.
The main economist of Deutsche Bank, Peter Sidorov, echoes the idea that individual Fed members could vote against the wishes of a new chief if they feel that Trump has exceeded.
“Note that even if the president of the Fed has a significant influence on the FOMC, monetary policy actions are taken by a majority vote so that the elimination of Powell could lead to an increase in the refoulement of other members against the pressure on the Fed to offer an easier policy,” Sidorov told customers on Tuesday.
This discussion on Wall Street comes after Trump criticized Powell several times in recent days, including calling the Fed chair “a big loser” in a social media position on Monday that rocked the financial markets. The economic adviser of the White House, Kevin Hassett, said last week that the president and his team explored the possibility of withdrawing the president of the Fed.
It is not clear if Trump even has the power to withdraw Powell before his mandate as president of the Governors’ Council ends next year. Powell previously said that he did not think he was legally authorized to the president to dismiss him. The Supreme Court should hear an appeal concerning the dismissal by Trump of members of the Board of Directors in other federal organizations in a case which could shed light on the next step for the Fed.
Speculation on changes to the Fed, as well as the current pricing uncertainty, seems to have harmed investors’ confidence in the United States. American shares, bonds and the dollar have all fallen in recent weeks.
Wall Street pros fear that Fed changes can lead to new sales and fears of higher inflation.
“Any reduction in FED’s independence would add risks to the increase in inflation prospects that are already subject to the upward pressures of tariffs and somewhat high inflation expectations,” ironed in a note to customers.
“We hoped that these negative consequences would dissuade the president from threatening the independence of the Fed, although so far, the president has often followed his intentions,” he added.
– Michael Bloom of CNBC contributed to the reports.
