The US Federal Reserve chair, Jerome Powell, has for months faced attacks from Donald Trump, who has threatened to fire the head of the central bank.
While Trump has since walked back his attacks against Powell, insisting he has “no intention” of terminating him after markets slumped, relations between the pair remain strained.
Any move by the White House to formally dismiss the Fed chair would be unprecedented. The president has historically respected the independence of the central bank, and kept out of its way – even if there was disagreement over policy.
But, of course, it looks like Trump is following his own playbook.
“Powell’s termination cannot come fast enough!” Trump said on social media in April.
The Fed chair first took office in 2018 after an appointment from Trump, and was later reappointed by Joe Biden in 2022. Though his term is expected to end in May 2026, multiple reports suggested that Trump was considering firing the chair before his term is up.
Here’s what we know is going on between Trump and the Federal Reserve.
What does the Federal Reserve do?
As the central bank, the Fed manages the money supply in the US, primarily by setting the interest rate. When setting it, the Fed considers the inflation rate and the labor market, what it calls its “dual mandate”: higher interest rates could bring down inflation, but negatively affect the labor market, while lower interest rates could do the opposite.
Over the last few years, starting before Trump’s second term, the central bank has been trying to bring down inflation, which peaked at 9% in June 2022.
To do that, the Fed raised interest rates to a multi-decade high of between 5.25% and 5.5%. Just a few years before, at the height of the pandemic, in 2020 and 2021, interest rates had been close to zero. This made it cheaper to borrow money, including taking out mortgages.
Late last year, the Fed lowered interest rates, which are now 4.25% to 4.5% – a whole point lower than where they were a year ago.
US stock markets are very sensitive to Fed decisions. Stocks started to climb after September, when the Fed started cutting rates.
Why is Trump attacking the Federal Reserve?
Since Trump took office again, Fed officials held three meetings, in January, March and May, at which they could have changed interest rates. At all three, they declined to touch the rates, citing economic uncertainty.
“Uncertainty about the economic outlook has increased further,” the Fed said on Wednesday, as it held rates again. In a statement, it added that its committee of policymakers “judges that the risks of higher unemployment and higher inflation have risen”.
After Trump introduced his newest slate of tariffs, he said on social media that he expected Powell to cut interest rates. “This would be a PERFECT time” for rate cuts, Trump wrote on social media. “CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS.”
From Trump’s perspective, cutting rates could offset the impact that his tariffs are having on the US stock market. But for Fed officials, it would risk exacerbating inflation.
Powell – who is extremely careful with his public remarks – made some statements that made clear the Fed believes Trump’s tariffs will make prices go up, making it far less likely that the central bank would decrease rates.
“Our obligation is to keep longer-term inflation expectations well-anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” he said in Chicago recently.
This seemed to set Trump off. “If I want him out, he’ll be out of there real fast, believe me,” the president told reporters in the Oval Office. “I’m not happy with him.”
Can Trump legally fire the Fed chair?
The clearest answer: right now, probably not, but things could change.
Powell has affirmed that the Fed’s independence “is a matter of law”.
“We’re not removable except for cause,” Powell said. “Fed independence has pretty broad support across both political parties and on both sides of the hill.”
But he also mentioned a case going through the supreme court that may alter the power the president has over federal agencies, stemming from Trump firing an official with the National Labor Relations Board. It is unclear how the court will rule, but it allowed the firings to stand, overruling a lower court.
“I don’t think that that decision will apply to the Fed, but I don’t know,” Powell said. “It’s a situation that we’re monitoring carefully.”
The Fed’s next board meeting is on 17 and 18 June. Trump is likely to continue pressuring the Fed ahead of this meeting, but officials are not expected to budge.
What is the Fed’s case for independence from the White House?
The Fed, which holds huge power over the economy, has to be extremely careful about each decision it makes.
Moves made by the central bank can affect the stock market, the value of the US dollar and government bonds – which all, in turn, affect the US economy.
On the Fed’s independence, Powell said that officials “will only make our decisions based on our best thinking, based on our best analysis of the data and what is the way to achieve our dual mandate goals as we can to best serve the American people”.
“We will do what we do strictly without consideration of political or any other extraneous factors,” he said.
