Trump pushes Powell to cut rates, renewing debate over Fed independence

President Donald Trump renewed his attack on Jerome Powell Thursday, declaring in a social media post that the Federal Reserve chairman’s “termination can’t come fast enough.”

The strongly worded message marks the latest in a series of criticisms the president has directed toward the Fed chairman, tied largely to Powell’s reluctance to lower interest rates in the early months of the year. Trump himself appointed Powell in 2017. 

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“The [European Central Bank] is expected to cut interest rates for the 7th time [today], the president said on his Truth Social network. “Oil prices are down, and the USA is getting rich on tariffs.” 

Powell “should have lowered interest rates, like the ECB, long ago, but he should certainly lower them now,” the president added. “Powell’s termination cannot come fast enough.”

The president’s post came just hours before the ECB confirmed its quarter-point rate cut.

The Fed chair, for his part, insisted in a speech to the Economic Club of Chicago that Trump’s tariff regime is having a bigger-than-expected impact on both growth and inflation. As such, Powell said, the tariff policy is making the central bank’s remit of price stability and full employment increasingly difficult. 

He also noted that he and his colleagues would need more time to assess the tariffs’ impact, and although he didn’t specifically mention the on-again/off-again nature of the president’s tariff strategy, it was clear that the ongoing series of pauses, changes and exemptions have made that assessment nearly impossible.

Tariffs boost inflation risks: Fed Chair Powell

“Tariffs are highly likely to generate at least a temporary rise in inflation (and) the inflationary effects could also be more persistent,” Powell said.

“Avoiding that outcome will depend on the size of the effects, on how long it takes for them to pass through fully to prices, and, ultimately, on keeping longer-term inflation expectations well anchored,” he added.

Recent inflation readings have been benign, with the March CPI report showing headline pressures easing to 2.4%, and falling on a monthly basis for the first time in two years.

Related: Tariff risks handcuff Trump and Fed’s Powell

Many economists have noted, however, that the March data fail to capture the impact of tariffs on goods from Canada and Mexico, which Trump delayed late in February, as well as the sweeping reciprocal levies, including a staggering 145% tariff on China imports, unveiled earlier this month. 

“We think core CPI inflation will peak later this year at 3.5%, with core PCE inflation at 3.2%, if the current menu of tariffs stays in place,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconmics.  

“Retailers will struggle to pass on all the costs (related to tariffs), and associated falls in oil prices and shipping costs also have offset a fraction of their direct boost to inflation.”

The broader economy is slowing as well, with first-quarter retail sales largely stagnant and the Atlanta Fed’s GDPNow tracker pegging the Q1 contraction at around 2.4%.

Fed cuts coming — but not just yet

At present, investors aren’t expecting any near-term moves from the Fed, pricing in only a 14% chance of a quarter-point rate cut when the central bank meets next month in Washington. 

The odds of a reduction in June, however, when Fed officials will publish new growth and inflation forecasts, are pegged at around 60%, with bets on at least two follow-on cuts over the second half. 

A larger debate, as to whether the president has the legal authority to remove a Fed chairman before he or she completes a four-year term, remains unsettled. 

Trump: Jerome Powell of the Fed, who is always TOO LATE AND WRONG

Powell’s termination cannot come fast enough! pic.twitter.com/atDwNIB70b

— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) April 17, 2025

Powell, whose second term expires in May 2026, has said such a move is “not permitted under the law.” But recent Supreme Court decisions allowing Trump to temporarily remove the heads of independent agencies has added a layer of uncertainty to that assessment.

More Economic Analysis:

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The Fed chairman told the Economic Club of Chicago event that he was “monitoring carefully” the evolution of that ruling from Chief Justice John Roberts.

Evercore ISI strategist Krishna Guha said a direct Trump threat to the Fed’s independence would “intensify market stress,” but he also argued that “the stakes are so high we think the Court will likely find a way to avoid creating a precedent” to prevent it.

And he noted the likely volatility in between: “If you liked the tariff debacle in markets, you’d love the loss-of-Fed-independence trade.” 

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