Fed Chair Jerome Powell under pressure from Donald Trump; can the President fire him as interest rates hold steady at 4.25%-4.5%?

Most investors had expected the Federal Reserve to opt to hold interest rates steady at 4.25% to 4.5% as it did in its latest policy meeting on January 29. But, US president Donald Trump was not very happy with Fed Chair Jerome Powell's decision, as per a report.

The Fed’s decision comes as inflation has started cooling and the job market remains strong after a triple rate cut in 2024. Even Powell pointed to solid economic growth, a stable job market, and inflation that's easing but still a little high, reported Benzinga.

Trump criticises latest Fed decision

However, Trump argued that the Fed is not doing enough to fuel growth, as per the report. Trump has always criticized the Fed for not adopting an aggressive means to cut rates, and, once again, he called out Powell for his inaction, according to Benzinga.


While the tense relationship between both is not new. Trump and Powell have been at odds for years, with Trump even suggesting he could fire him, as per the report.

Is firing Powell really an option for Trump?

The Federal Reserve Chair serve fixed terms and unless there’s a legal cause, the president can’t just fire them. Powell has made it clear he’s committed to serving out his full term, which lasts until 2028, reported Benzinga.

Trump's push for lower oil prices and rate cuts

In addition to deeper rate cuts, Trump has also pushed for lower oil prices, which could make the Fed’s fight against inflation even trickier.

Fed's approach to inflation

The Fed’s decision aligns with its stance from December, where it indicated it wasn't in a rush to cut rates further. New data from January shows that inflation is cooling, and the job market is holding steady, as per the report. The Fed's independence remains crucial for financial stability, and any political pressure could rattle markets both at home and abroad.

US trade policy and its impact

Meanwhile, trade policy continues to be a wildcard. The US has leaned heavily on tariffs, especially against China, since Trump’s first term. That approach continued under former president Joe Biden, and the tariffs are still in place. But China has adapted, now it dominates five of the ten fastest-growing trade routes, while the US has been left out of some major trade deals.

Despite this, America’s share of global GDP rose to 25%, and US financial markets still account for nearly 70% of global equity indices, as per the report. While global trade talks stalled after the 2008 financial crisis, smaller regional agreements have moved forward.

FAQs

Who is Jerome Powell?
Jerome Powell is the current Chair of the Federal Reserve, the central bank of the United States. Appointed by president Trump in 2018, Powell is responsible for guiding the nation's monetary policy, which includes setting interest rates and managing inflation.

How does Trump’s push for lower oil prices affect the Fed's work?
Trump has called for lower oil prices to help boost the economy, but this could complicate the Fed's efforts to control inflation. Lower oil prices can make it harder for the Fed to manage inflation, which is one of their key responsibilities, creating a delicate balancing act.