US President Donald Trump is pushing the boundaries of economic policy by suggesting he could remove Federal Reserve Chair Jerome Powell, a move that has sent shockwaves through financial markets.
The potential threat to the Fed’s independence has investors on edge, leading to market downturns and declining stock prices. The White House has been accused of politicizing monetary policy, which is essential for maintaining economic stability.
No US president in the past half-century has attempted to force the Fed to implement policies that benefit their re-election campaign. Richard Nixon, who urged Fed Chair Arthur Burns to keep monetary policy loose before the 1972 election, faced disastrous consequences for inflation.
The US dollar’s reputation as a safe-haven currency is at risk if the Fed becomes politicized. Long-term interest rates may surge, making it harder for the government to borrow money to operate.
Powell has stated his intention to complete his term as Fed chair, set to end in May 2026. Market experts warn that Trump’s actions could have long-term consequences for inflation expectations and interest rates, even if Powell remains in office.
The Fed operates independently to achieve its congressionally mandated goals of maximum employment and stable prices. Any perceived interference with the central bank’s authority could lead to a surge in inflation expectations, creating a self-fulfilling prophecy.
Trump’s comments have raised concerns about his use of executive power, which may require judicial intervention if he attempts to remove Powell without authorization.
Source: https://www.axios.com/2025/04/22/trump-powell-fed