President Donald Trump has threatened to fire Federal Reserve Chair Jerome Powell, sparking concerns about the stability of the central bank. However, some of his allies believe that keeping the Fed’s independence is crucial for the president’s own interests.
Trump’s grievances with Powell stem from the chair’s refusal to cut interest rates in response to political pressure. Trump has been vocal about his desire to lower borrowing costs and boost economic growth, but Powell has consistently pushed back against these demands.
Despite the tension between Trump and Powell, some of the president’s allies see value in maintaining the Fed’s independence. This includes having a central bank that can resist pressure from politicians to cut rates, which could lead to higher inflation and reduced credibility for the economy.
Trump’s advisors have made this argument, with JPMorgan Chase CEO Jamie Dimon stating that the Fed’s independence is crucial for the economy. “The independence of the Fed is absolutely critical,” Dimon said. “Playing around with the Fed can often have adverse consequences.”
While Trump doesn’t fully agree with this perspective, it’s unclear whether he will adopt a more nuanced view on the importance of Fed independence. However, his administration has publicly endorsed the idea that the Fed should maintain its freedom to set policy as it sees fit.
The short list of potential replacements for Powell includes National Economic Council Director Kevin Hassett, former Fed board member Kevin Warsh, Treasury Secretary Scott Bessent, and current Fed board member Chris Waller. All four candidates have suggested that rates should be lower, but the extent to which they plan to cut rates is still unknown.
Ultimately, Trump’s willingness to preserve the Fed’s independence will determine the future of the central bank. If he prioritizes maintaining the status quo, it could lead to a more stable economy and reduced inflation. However, if he seeks to exert more control over the Fed’s actions, it could have adverse consequences for the economy and financial markets.
Source: https://www.politico.com/news/magazine/2025/07/16/trump-powell-fed-independence-interest-rates-inflation-00459115