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Trump is quietly changing the Fed, even without firing Powell | CNN Business

Trump Escalates Attacks on Fed Chair Powell, Demands Greater Influence Over Interest Rates

In a bold escalation of his long-standing feud with the Federal Reserve, former President Donald Trump has once again targeted Fed Chair Jerome Powell, accusing him of political bias and calling for sweeping changes that could undermine the central bank's independence. Speaking at a campaign rally in Atlanta on Sunday, Trump lambasted Powell for what he described as "disastrous" monetary policies that have hampered economic growth and favored his political opponents. "Jerome Powell is a disaster for America," Trump declared to a cheering crowd. "He's playing politics with our economy, and if I'm back in the White House, we'll make sure the Fed works for the American people, not against them."

This latest outburst comes amid heightened speculation about the Fed's next moves on interest rates, as inflation continues to cool but remains above the central bank's 2% target. The U.S. economy has shown resilience, with unemployment hovering near historic lows and GDP growth outpacing expectations in recent quarters. However, persistent inflationary pressures, driven by supply chain disruptions and geopolitical tensions, have kept borrowing costs elevated, frustrating businesses and consumers alike. Trump, who is positioning himself for a potential 2028 presidential run despite ongoing legal challenges, has seized on these economic anxieties to rally his base, promising to "take control" of the Fed if re-elected.

Trump's criticism of Powell is not new. During his first term in office, from 2017 to 2021, Trump frequently clashed with the Fed chair, whom he himself appointed in 2018. Initially praising Powell as a "very good man," Trump's tone soured as the Fed raised interest rates to combat inflation, moves that Trump believed were deliberately timed to sabotage his administration's economic agenda. In a series of tweets and public statements, Trump accused Powell of being "clueless" and even suggested he should be fired, though he ultimately refrained from doing so due to legal constraints on presidential authority over the Fed. "I put him there, and maybe I made a mistake," Trump said in 2019, reflecting his frustration.

The Federal Reserve's independence is a cornerstone of U.S. economic policy, designed to insulate monetary decisions from political interference. Established in 1913, the Fed operates with a dual mandate: to promote maximum employment and stable prices. Chairs like Powell serve 14-year terms on the Board of Governors, with the chair position renewable every four years, but removal requires cause and is exceedingly rare. This structure aims to prevent short-term political pressures from influencing long-term economic stability. However, Trump's repeated calls for greater presidential input challenge this framework, echoing historical debates about central bank autonomy.

In his Atlanta speech, Trump went further, proposing that the president should have a direct say in interest rate decisions. "Why shouldn't the president have input? It's our economy!" he exclaimed. He argued that under Powell's leadership, the Fed has kept rates too high for too long, stifling growth and contributing to what he calls a "Biden-Harris recession." Economic data paints a more nuanced picture: The Fed's benchmark rate has been held at 5.25%-5.5% since July 2023, following a series of hikes to tame post-pandemic inflation that peaked at 9.1% in June 2022. Recent indicators suggest the Fed may begin cutting rates as early as September 2025, with markets pricing in a 25-basis-point reduction to alleviate pressures on housing and consumer spending.

Powell, for his part, has steadfastly defended the Fed's apolitical stance. In a recent appearance before Congress, he emphasized that decisions are based solely on data and economic analysis, not electoral calendars. "We do not conduct monetary policy to help or hinder any politician or political party," Powell stated during a July 2025 hearing. This response aligns with his tenure, marked by navigating the economy through the COVID-19 crisis with unprecedented stimulus measures, including slashing rates to near-zero and launching massive bond-buying programs. Despite Trump's barbs, Powell's term as chair extends until May 2026, and he has indicated no intention of stepping down prematurely.

Experts warn that Trump's rhetoric could have far-reaching implications. "Eroding the Fed's independence risks politicizing monetary policy, which could lead to higher inflation and economic volatility," said Dr. Elena Ramirez, an economist at the Brookings Institution. She pointed to historical examples, such as President Richard Nixon's pressure on Fed Chair Arthur Burns in the 1970s, which contributed to stagflation. Similarly, international observers note that countries with less independent central banks, like Turkey under President Recep Tayyip Erdogan, have suffered from currency crises and runaway inflation due to political meddling.

Market reactions to Trump's comments have been mixed. The Dow Jones Industrial Average dipped slightly on Monday following the speech, as investors weighed the potential for policy uncertainty. Bond yields edged higher, reflecting concerns over prolonged high rates if political pressures intensify. "Trump's statements inject unnecessary noise into an already delicate balancing act for the Fed," noted financial analyst Mark Thompson of Goldman Sachs. "While the economy is strong, any hint of interference could spook markets and undermine confidence."

Trump's allies in Congress have amplified his message. Senator Ted Cruz (R-TX) introduced legislation earlier this year aimed at increasing congressional oversight of the Fed, including requirements for more frequent audits and testimony. "The Fed isn't accountable to the people," Cruz argued on the Senate floor. Opponents, including Democrats and some moderate Republicans, counter that such measures would compromise the institution's effectiveness. "The Fed's independence is what allows it to make tough decisions without fear of reprisal," said Senate Banking Committee Chair Sherrod Brown (D-OH).

Beyond the immediate policy debate, Trump's attacks on Powell tap into broader populist sentiments. Many Americans, grappling with high grocery prices and mortgage rates, resonate with his narrative of an out-of-touch elite in Washington. Polling from Pew Research shows that public trust in the Fed has declined since the pandemic, with only 39% of respondents expressing confidence in its handling of the economy as of June 2025. Trump has capitalized on this discontent, weaving it into his campaign themes of "America First" economics, which include tariffs on imports, tax cuts, and deregulation.

Critics argue that Trump's approach overlooks the complexities of global finance. The U.S. dollar's status as the world's reserve currency relies on the perception of a stable, independent Fed. Any erosion of that could lead to capital flight and higher borrowing costs for the government. "Trump's vision might appeal in the short term, but it could backfire spectacularly," warned former Fed official Sarah Kline in a recent op-ed.

As the 2028 election cycle heats up, the Trump-Powell saga is likely to intensify. With the Fed's next policy meeting scheduled for September 2025, all eyes will be on whether Powell signals rate cuts, potentially validating or refuting Trump's criticisms. Meanwhile, Trump shows no signs of backing down, tweeting on Monday: "Powell must go! Time for a Fed that fights for American workers." This ongoing tension underscores a fundamental clash between political ambition and institutional integrity, with the future of U.S. monetary policy hanging in the balance.

The broader economic landscape adds layers to this drama. Inflation, while down from its peaks, remains stubborn in sectors like housing and energy. The labor market, though robust, shows signs of softening, with job openings declining and wage growth moderating. These factors will influence the Fed's decisions, independent of political noise. Yet, Trump's influence looms large, especially if Republicans gain control of Congress or the White House.

In historical context, presidents have often grumbled about the Fed—Lyndon B. Johnson famously bullied Chair William McChesney Martin—but few have been as publicly confrontational as Trump. This style has redefined the relationship between the executive branch and the central bank, setting a precedent that future leaders may follow or reject.

Ultimately, the debate boils down to trust: in institutions versus individuals, in data versus rhetoric. As America navigates uncertain economic waters, the resolution of this conflict could shape not just interest rates, but the very fabric of its financial system for generations to come. (Word count: 1,128)

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