The president Donald Trump intensified his attacks on the head of the Federal Reserve (Fed), Jerome Powell, on Thursday while criticizing the central bank for not aggressively cutting interest rates.
In a context of increasing tension regarding the direction of the country's monetary policy, Trump even hinted that he might dismiss Powell, whose term does not conclude until next year.
Trump's attack came a day after Powell pointed out that the president's own trade policies, particularly his widespread tariffs, were creating uncertainty in the markets and hindering economic decision-making by the Fed.
“We are seeking greater clarity” on how changes in immigration, taxes, regulation, and trade will affect the economy, Powell said on Wednesday during a speech.
The effect was immediate: The comments from the Fed chairman contributed to a significant drop in stock prices on Wall Street, reviving fears of an economic slowdown.
Trump: Praises for tariffs, criticism of Powell
Through his social media, Trump reiterated his defense of tariffs as an economic tool and criticized Powell for his inaction.
"The prices of oil are falling, groceries (even eggs!) are going down, and the United States is GETTING RICH FROM TARIFFS," he said, adding that Powell "should have lowered interest rates, like the ECB, a long time ago, but he certainly should lower them now. Powell's dismissal cannot come quickly enough!"
His statements came on the same day that the European Central Bank cut its key interest rate from 2.5% to 2.25%, a decision that Trump used as a reference to urge the Fed to take a similar path.
Powell's Defense: The Fed Does Not Yield to Political Pressures
Jerome Powell, who was initially nominated by Trump in 2017 and confirmed for a second term by President Joe Biden in 2022, responded with a strong defense of the independence of the central bank.
"We will never be influenced by any political pressure," he stated during his speech at the Chicago Economic Club.
“Our independence is a matter of law. We cannot be removed except for cause. We serve very long terms, seemingly endless. So we are protected by the law”, Powell continued, expressing his confidence that Congress would not alter that structure, highlighting the bipartisan support for the institution's autonomy.
In November, during a press conference, Powell also assured that he would not resign if Trump asked him to.
Concern in the markets and warnings from analysts
Trump's criticisms and the possibility of direct political interference in the Fed have raised alarms among economists and investors.
"A sudden crystallization of the threat to the independence of the Fed... would intensify market stress," warned Krishna Guha, an analyst at the investment bank Evercore ISI, in statements cited by the agency AP.
"If you enjoyed the market debacle due to tariffs, you'll love the selling of stocks with the loss of the Fed's independence," he added.
The perception of a Fed pressured by the White House could undermine market confidence in the stability of monetary policy, at a time already fraught with global uncertainty, experts estimate.
Tariffs, inflation, and an economy under pressure
Trump has implemented a series of tariffs as part of his trade policy, with measures that included increases of up to 145% on Chinese products and additional tariffs on countries like Canada and Mexico, as well as on sectors such as automobiles, steel, and aluminum.
Although the president asserts that these measures enrich the United States, their impact has been a subject of heated debate.
Banks like Goldman Sachs have raised the likelihood of a recession, while surveys reflect a growing pessimism among consumers.
Many fear that the costs of tariffs will be passed on to consumer prices, worsening inflation and weakening consumption.
The confrontation between Donald Trump and Jerome Powell represents much more than a simple disagreement over interest rates. It is a clash between the vision of a president seeking direct control over all aspects of economic policy and a central bank that defends its autonomy as a guardian of the country's financial stability.
Frequently Asked Questions about the Confrontation between Trump and the Federal Reserve
Why does Donald Trump want to remove Jerome Powell?
Donald Trump has criticized Federal Reserve Chairman Jerome Powell for not aggressively lowering interest rates, suggesting that this inaction negatively impacts the U.S. economy. Trump has hinted that he might dismiss Powell if he does not take action in this direction. Tensions have escalated following Powell's comments that Trump's trade policies, particularly the tariffs, create uncertainty in the markets.
How do Trump's tariffs affect the economy of the United States?
The tariffs imposed by Donald Trump have sparked intense debate over their economic impact. While Trump argues that they enrich the country, experts warn that they could increase inflation and reduce economic growth. Trump's tariff policy has led to tensions with several countries and is viewed as a contributing factor to economic uncertainty.
What consequences could Powell's removal have for the Federal Reserve?
The dismissal of Jerome Powell could undermine the independence of the Federal Reserve, leading to a loss of confidence in the markets regarding the stability of U.S. monetary policy. Analysts and economists fear that direct political interference in the Fed could intensify market stress and negatively impact the global economy.
What position has Jerome Powell taken in response to Trump's criticisms?
Jerome Powell has maintained a strong defense of the independence of the Federal Reserve against political pressures. He has asserted that the Fed will not succumb to political pressures and has expressed his confidence that Congress will uphold the institution's autonomous structure. Powell has also indicated that he would not resign if Trump requested it.
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