President Trump this week revived a longstanding threat against Jerome H. Powell when he accused the Federal Reserve chair of “playing politics” and moving too slowly to lower interest rates. But privately, according to people close to Mr. Trump, the president has for months been aware that trying to oust Mr. Powell could inject more volatility into jittery financial markets.
Investors are already uneasy after a period of tumult after a blitz of tariffs announced by the administration this month. Undermining the political independence of the Fed, which is seen as critical across Wall Street, could risk a much more significant financial panic.
“If I want him out, he’ll be out of there real fast, believe me,” Mr. Trump told reporters in the Oval Office of the White House on Thursday when asked about Mr. Powell. The warning came on the heels of an early morning social media post in which Mr. Trump said “Powell’s termination cannot come fast enough!”
Mr. Trump’s advisers have repeatedly told him that firing Mr. Powell is both legally and financially fraught — and the uncertainty could cause a significant downturn in financial markets. Mr. Trump, at least for the moment, has seemed persuaded, the people said.
For months, Mr. Trump has privately fretted about the prospect of a Great Depression-scale event happening on his watch — a scenario he shorthands in conversations as “1929.” But the events of the past two weeks so alarmed some of Mr. Trump’s closest advisers, including his Treasury secretary, Scott Bessent, that Mr. Trump himself seems to have absorbed how close they came to a financial meltdown.
Mr. Trump’s decision at the beginning of the month to announce historic tariffs on nearly all of the country’s trading partners and aggressively escalate his global trade war sent financial markets into a tailspin. Stocks plummeted and an alarming sell-off in U.S. government bonds and the dollar fanned fears that the country was starting to lose its vaunted status as the safest corner in the financial system.
After the scope of Mr. Trump’s tariffs became clear, Mr. Powell cautioned that the policies would lead to both higher inflation and slower growth. His comments suggested that the bar would be high for the Fed to lower rates, after a series of cuts last year.
Mr. Trump soon reversed course and paused many of his tariffs for 90 days, citing a “queasy” bond market. But that reprieve ended swiftly as Mr. Trump raised tariffs on Chinese imports to at least 145 percent even as he exempted an array of the most widely-used consumer electronics and heralded imminent trade deals with other countries. The whiplash has kept financial markets on edge and has done little to alleviate Mr. Powell’s concerns about the economic outlook.
At an event at the Economic Club of Chicago on Wednesday, Mr. Powell made clear that it was the Fed’s “obligation” to ensure that “a one-time increase in the price level does not become an ongoing inflation problem” even as he reiterated his warnings about the prospects of slower growth. He also stressed that the Fed could afford to be patient on taking further action on interest rates until it had more clarity about the outlook.
Those comments, coupled with the fact that the European Central Bank was readying to lower interest rates on Thursday, appeared to set off Mr. Trump’s tirade against Mr. Powell.
Even before the recent bond market turmoil, it seemed to advisers that Mr. Trump was leery about firing Mr. Powell. Mr. Trump regularly complains about how “terrible” Mr. Powell is and that he believes he’s deliberately keeping interest rates high to hurt Mr. Trump, for political reasons, an adviser said, but the president has not seemed serious about replacing him imminently.
Last week, Mr. Bessent, who described the Fed’s independence as a “jewel box that’s got to be preserved,” said the White House would begin interviewing candidates this fall to replace Mr. Powell. Mr. Trump had nominated Mr. Powell in his first presidential term, and President Joseph R. Biden renominated him. Mr. Powell’s term as chair officially ends May 2026, although his term as a governor runs through 2028, suggesting he could stay on the Board of Governors if he wanted to. Mr. Trump will first be able to fill a vacancy in January, when the term expires for Adriana Kugler, a sitting governor.
The president has already appointed Michelle Bowman, a current governor, to be the next vice-chair for supervision in charge of regulating Wall Street. That position became available in February after Michael Barr, who stayed on as a governor, stepped down from the position to avoid a protracted legal battle with Mr. Trump that he worried would hurt the central bank.
Kevin Warsh, a former Fed governor with close ties to Mr. Bessent, is seen as a leading contender to serve as the next chair. During the transition, Mr. Trump was interested in the idea of making Mr. Warsh, whom he had considered for Fed chair in his first term, his Treasury secretary. The president also considered installing him as Fed chair to replace Mr. Powell before the end of his term, according to people briefed on his thinking. At the time, Mr. Trump inquired about his legal rights to fire Mr. Powell, and what the broader effects of such a move would be.
Mr. Powell has been emphatic that the law does not permit a president to remove the chair of the central bank nor meddle directly with the institution. The Federal Reserve Act says that members of the Fed’s seven-strong board of governors can be removed only “for cause,” which is interpreted as serious misconduct and other violations.
When asked by reporters on Friday about the possibility of firing Mr. Powell, Kevin Hassett, the director of the National Economic Council, said “the president and his team will continue to study that matter.”
The Fed’s independence from the White House has historically been seen as crucial to the stability of the economy and the global financial system. Congress granted the central bank this status to ensure it could make policy decisions related to the economy and the banking system free from political interference.
The fear is that Mr. Trump will seek to erode that protection. Already, he has issued a sweeping executive order that seeks to exert authority over how the Fed oversees Wall Street. Monetary policy decisions were exempted, but the expansive nature of the order has raised questions about how long that separation will last.
Mr. Trump has also fired officials at the Federal Trade Commission, the Merit Systems Protection Board and the National Labor Relations Board, removals that have prompted legal challenges that are set to be heard by the Supreme Court.
What the Trump administration is arguing is that the precedent — which stems from a 1935 ruling commonly referred to as Humphrey’s Executor — infringes on the president’s executive power. The ruling’s proponents argue that it insulates independent agencies from undue political influence.
This month, Chief Justice John G. Roberts Jr. temporarily authorized Mr. Trump’s dismissals while the challenges move forward in court. The chief justice, acting on his own, issued an “administrative stay,” an interim measure intended to give the justices some time while the full Supreme Court considers the matter.
Mr. Powell on Wednesday said that he did not expect the court’s decision to apply to the Fed, but that it was something the central bank was “monitoring carefully.” The Fed’s independence was a “matter of law” and something that was “very widely understood and supported in Washington and in Congress, where it really matters,” he added.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
Jonathan Swan is a White House reporter for The Times, covering the administration of Donald J. Trump.
Maggie Haberman is a White House correspondent for The Times, reporting on President Trump.
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