I & I Editorial BoardWill President Donald Trump soon fire Federal Reserve Chairman Jerome Powell, as is now hotly rumored? And do you care? If not, maybe you should. Because at this moment, the Fed chief seems to think he has to re-fight the inflation battle he lost three years ago. And his refusal to cut rates is starting to choke our economy.
Make no mistake: Having lost the confidence of the president who appointed him, Powell should resign. As a matter of practical stewardship of the nation’s central bank, Powell’s effectiveness as a financial leader has been called into question. Time to go.
But Powell’s defenders bizarrely argue that Fed chairmen can’t be fired. In fact, they can be fired “for cause,” which is vague enough to cover a whole host of sins, major and minor.
His backers also argue that Fed chiefs have independence, and that Trump letting him go would shatter that.
But that’s also not true.
As John Tamny, RealClearMarkets editor, economist and author of books on the Fed, recently noted: “Fed officials are appointed by politicians. To presume that they didn’t politic to be in that position in the first place … is laughable.”
At issue currently is whether a politicized Fed has now become hostile to the admittedly mercurial Trump, who feels the Fed’s tight interest-rate policy is holding the economy back.
It is. Take one very important sector, which desperately needs lower interest rates: housing. Annual sales rates for existing homes fell to 3.67 million in May of this year, only slightly above the 3.45 million level at the depths of the financial crisis in 2010.
Why? With average mortgage rates at about 6.83%, buyers can’t afford payments. But as a Morgan Stanley survey in March noted, “91% of people considering buying a home in the next six months would be likely to do so if mortgage rates were to fall to 5.5%. Based on the survey, Millennials and Gen Z are likely to lead the next wave of homebuying.”
Yet, despite a continuing decline in inflation, the Fed won’t cut rates. Funny, when the Democratic Congress and President Joe Biden locked down the economy and spent nearly $6 trillion on COVID, setting off an inflationary spiral, the Fed did little to stop them.
In fact, the Fed began pouring money into an already super-stimulated economy. By doing so, and raising interest rates far too late, the Fed enabled the five-year 25% U.S. inflation surge that decimated real wages for workers, caused U.S. spending and debt to soar, and killed off thousands of businesses.
And we’re still digging out of that mess today.
As we noted above, a Fed chief can be fired for cause. To us, the last five years of Fed incompetence is cause enough. Powell has made too many mistakes, and squandered whatever goodwill he once had with his boss (that’s Trump, the man who appointed him, by the way) and average Americans.
As for Trump “not politicizing” the Fed, please. “Federal Reserve employees donated 92% of their $700k in political contributions to Democrats during the 2024 cycle,” noted our friend economist Stephen Moore of the Committee to Unleash Prosperity. “Does that sound ‘nonpartisan’ to you?”
No, it doesn’t. DEI has hit the Fed hard, just as it has every other major institution in America. The central bank is no different.
“I think what we need is regime change at the Fed,” former Fed governor Kevin Warsh told Maria Bartiromo on Fox’s “Sunday Morning.” “And that’s not just about the chairman, it’s about a whole range of people, it’s about changing their mindset and their models, and frankly it’s about breaking some heads, because the way they’ve been doing business is not working.”
Warsh is on Trump’s short list of possible successors for Powell. As is Kevin Hassett, Trump’s director of the National Economic Council, and Treasury Secretary Scott Bessent. They’re all highly qualified.
“The Fed is in need of perestroika,” writes economist Larry Kudlow, a top Trump economic adviser during his first term in office. “The Fed has to be cleansed of its Deep State dislike of all things Donald Trump, and frankly its Deep State bureaucratic groupthink of deadwood economists with models that haven’t worked in 50 years — who are now advising Chairman Jay Powell to fight Mr. Trump and his economic growth agenda.”
Why bring this up? This week, The New York Times reported that “The president waved a copy of a draft letter firing Jerome H. Powell at a meeting in the Oval Office with House Republicans.”
Responding, Trump says he’s “not planning” to fire Powell now, but doesn’t say he won’t.
If he does, we won’t shed a tear for Powell, whose latest foible was renovating the Fed building into a financial Taj Mahal at a cool $2.5 billion price tag. That alone is “cause” for firing.
We’ve all been warned that markets will “melt down” if Powell goes, with Deutsche Bank shrieking that “both the currency and the bond market can collapse.”
Maybe so. Maybe not. Markets have a way of confounding the predictions of even the smartest people. But even if true, it would still be better for Powell to go quietly than to bitterly fight to stay where he’s no longer wanted and clearly at odds with an elected president’s policies.
— Written by the I&I Editorial Board
If Powell has worn out his welcome then he needs to go. $2.5 billion dollars for a renovation? Guess if it’s other people’s money it appears that he wasn’t very concerned about this exorbitant cost. He should resign before Trump fires him.
Your own politicized bias is on full display with this article. The Fed has one real job: hold inflation down. This Fed has targeted 2% as the goal since 2012, so that was no secret to Trump when he appointed Powell to Chair. And the Fed has done the best job in my lifetime at bringing a rate that peaked at 10% back to 2% — without causing a recession! It’s not quite there, yet, so the policy that got us to 2.5% should continue until what has worked for the last 3+ years can be demonstrated to be no longer effective, that is, at reducing inflation. You seem not to care about inflation. You seem just to want a mercurial President (your adjective) to have his whimsical wind-blows way. And Trump clearly has demonstrated he cares nothing about inflation–or he wouldn’t have unleashed the economic oblivion of the Scamdemic on the entire friggin world in 2020. That, dear writer, is what caused the inflation crisis of the last 4 years. That was all due to Delano Don’s kneejerk incompetence in economics. But you want to fire Powell, not Trump? So yeah, you’re politicized bias is on full display, and you’re backing the wrong horse on this one particular issue.
Inflation has come down DESPITE the actions of the Fed, not as a response to any changes at that body.
The Fed cut rates by 0.5 points in September just in time for it to help Democrats running for office (per article 92% of Fed donations went to Democrats). CPI was 3.7% at the time, not 2% as you state their goal is. And CPI is 2.7% today which is “normal” and yet the Fed will NOT lower rates. And Powell’s reason? Because tariffs may cause inflation…but he has no idea when that might occur or even if it will occur. He just wants to be ready just in case. Yeah, right.
Powell’s selfish dislike of Trump is tamping down an economic boom. He was wrong about tariffs. Not only did they not spike inflation, tariffs have fueled a revenue surge while inflation continues to fall. In fact we experienced an unimaginable surplus. Powell’s job is to manage a stable dollar, not second guess the policies of the elected president.
Powell doesn’t need to be fired. The FED needs to be removed. Just as the western central bank was removed twice before.
The government was given the right to produce is own currency. We don’t need a private bank printing fiat out of thin air then charging us interest to use it. This is called a con. I highly recommend people read “The Creature from Jekyl Island” by G. Edward Griffin.
The $2.5 billion renovation is criminal. Powell should have been fired months ago.
Let’s not forget that in the lead up to the 2024 election, Jerome Powell cut interest rates in favor of the democrats thereby putting his finger on the scale to tip of the election.
Wow, an uber liberal at Deutche Bank crying wolf regarding the liberal at the Fed, color me surprised.
It’s a joke that the Fed Chairman is considered “apolitical”. As I&I writes a politician appoints him-but he’s not suppose to be grateful for this. He has gained a lot status, influence, probably a hefty raise, and power. All due to his appointment.
If you believe their is no bounty given by Powell to who appoints him then you also probably believe in the tooth fairy.
The question then becomes why not do what Trump asks? He appointed him in his first term, I believe. In my opinion a cut in interest rates is more than warranted and it will reduce our debt burden significantly. It will also reduce mortgage interest rates, credit card rates and will boost the economy.
We have opened up a lot of businesses on our shores. They probably would invest and expand if it weren’t for the high interest rates.
So, as I said, why not just acquiesce to Trump. Why not? Because Biden appointed Powell to his second term. As I recall he lowered interest rates during Biden’s inflation.
Thus this, I believe, is why Powell is antagonistic to what Trump wants.
The old chestnut: “You swing with whoever brought you on the date.” Biden and his Administration was the last to bring Powell on a date. So Powell is loyal to Biden economics. Trump is in the way.
It is unfortunate for us, that we are also in the way. It would be nice to have a booming-noninflationary-economy. We won’t get it with Powell. He is just to loyal to the last guy who asked him out.
If Trump can fire Powell…why hasn’t he? There’s a lot more status quo in the Trump Administration than I voted for…
Powell firing: If he won’t leave voluntarily, then cut his salary by 3/4. That would get his attention.