President Donald Trump called for the removal (termination) of the Federal Reserve chair, Jerome Powell, over frustration that the Fed has not cut interest rates recently.
Is there a risk associated with threatening the chair of the Federal Reserve?
On Thursday Trump posted on his Truth Social media outlet this:
“The ECB is expected to cut interest rates for the 7th time, and yet, “Too Late” Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete “mess!”. Oil prices are down, groceries (even eggs) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!” (emphasis added)
Posted at 6:12 a.m.
Jerome Powell was nominated by then President Trump to chair the Fed in 2017 and was renominated by President Biden in November 2021. Powell’s current term will end on May 15, 2026, if he lasts until then.
Powell’s salary as a government employee is $203,500 per annum. But Powell’s net worth is estimated to be approximately $55 million as he had a successful career as a partner at the Carlyle Group, a large global investment firm with $447 billion in assets that specializes in private equity, real assets and private credit. Powell was there from 1997 to 2005.
Powell spoke to the Economic Club of Chicago on Wednesday, the day before Trump’s social media post.
Here are some excerpts from the transcript of that speech which may have triggered the President:
“The level of the tariff increases announced so far is significantly larger than anticipated.”
“… the economic effects (of the tariffs) which will include higher inflation and slower growth”
“Tariffs are highly likely to generate at least a temporary rise in inflation”
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem”
“As that great Chicagoan Ferris Bueller once noted, “Life moves pretty fast””
And, in response to a question, he stated:
“(Tariffs are) “likely to move us further away from our goals … probably for the balance of the year”
It seems clear from these statements that Powell believes that his job is now a lot more difficult than before, as the tariff war is likely to trigger inflation and cause job losses. Not wanting to get caught as the Fed did after 2020 when inflation surged out of control, Powell would like to make sure that the inflationary impulse from higher prices will be constrained by the Fed. He appears to be putting containing inflation ahead of the Fed’s other goal — maximizing employment.
The other way to interpret this is that Powell is saying that there will be no interest rate cuts if this tariff war continues much longer.
Trump and Powell are headed for a showdown.
Hilliard MacBeth
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