Former President Donald Trump has been rumored to be making a deal with former-Federal Reserve Governor Kevin Warsh. This has led to speculation that they might consider preemptively replacing current Fed Chairman Jerome Powell. Such conversations took place around a table at Trump’s private club, Mar-a-Lago, in Florida. The Wall Street Journal first revealed these conversations, suggesting that Trump has reached his wit’s end with Powell’s stewardship of the Fed.
In a recent post on Trump’s truthless social media Kremlin—Truth Social— Trump left little doubt that he was not happy with Powell. His announcement that the chairman’s “resignation couldn’t happen soon enough! This sentiment reflects Trump’s ongoing criticism of Powell, particularly concerning the Fed’s monetary policy and interest rates. His term is slated to run through May 2026. Unlike Trump’s predecessors, he does not shy away from making his desire very clear.
Warsh has helped steer Trump’s economic policy. Inflation would be an insufficient reason to undertake extreme actions to oust Powell or upend his term, he warns. Despite this advice, Trump remains adamant. He mentioned in the Oval Office, “I let him know it, and if I want him out, he’ll be out of there real fast, believe me.” This declaration underscores Trump’s assertive stance on the issue and his ongoing belief that the Fed should lower interest rates.
The back and forth between the president and Warsh has been in the works, with talks going as far back as last February reported. Moreover, as recently as early March, others have been pleading with Trump not to fire Powell. Powell wants to make it clear that the president does not have the legal authority to fire him. This is a very key point to understand.
Trump’s political attacks on the Fed have alarmed economists and political officials across the spectrum. Notably, Senator Elizabeth Warren warned that undermining the independence of the Federal Reserve could lead to catastrophic consequences for U.S. markets. Surprisingly, even Trump’s critics have sounded alarm bells over his attack on Powell, making the case that independence for the Fed is crucial.
With Trump on the outside, still attacking Powell’s tightening and calling for lower interest rates, this is an ongoing story. The implications of the former president’s continued influence on economic policy can’t be overstated. This would be potentially revolutionary, not just for financial markets but for United States monetary policy.
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