An explainer on Trump's feud with Fed

You're fired! That was President Donald Trump's favorite catchphrase when we was the star of "The Apprentice" television show. He has threatened to use that phrase in dealing with Federal Reserve Chair Jerome Powell. Trump has made it clear he is not happy that the Federal Reserve has not lowered interest rates in recent months. The president has threatened to fire "Too Late Powell" as he has referred to him several times only to later retract his threat. The Fed has paused interest rate cuts that they began last year because it is worried inflation is going to go back up due to the president's tariffs. Trump wants lower interest rates and he is going to do whatever he can do to get them lowered. Powell's term as Fed chair does not end until May of 2026, but already, Trump says he is searching for a replacement. He is screening candidates. Trump chose Powell to be Fed chair in 2018 during his first term. He quickly soured on Powell because the Fed was raising interest rates at the time and Trump didn't want the Fed to keep raising them. In 2019, the Fed cut interest rates under Powell, but not fast or large enough for Trump's liking. Trump wanted lower interest rates. He thought he was getting that with Powell but he did not. It took the Covid crisis for Trump to finally get what he wanted. During the pandemic, the Federal Reserve reduced interest rates to almost zero. In 2022, then President Joe Biden reappointed Powell for a second four-year term. That same year, inflation soared, prompting the Federal Reserve to raise interest rates to around 5%. In 2024, the Fed lowered interest rates, but not by much. Trump has repeatedly said that he wants Powell to resign. Powell has said he will not step down. "When Congress created the Federal Reserve System in 1914, it had the foresight to include a requirement that presidential appointees for the Board of Governors confirmed by the Senate serve 14-year terms" according to Arthur Frazier Assistant Professor of Business at Heidelberg University. "This was done to insulate the Board of Governors from political pressure when conducting monetary policy. Therefore, Trump cannot legally fire Powell simply because he disagrees with the Fed's monetary policy." Interest rates are a concern in markets due to tension between lowering interest rates to stimulate economic activity in the short-term versus keeping interest rates higher to keep inflation in check. So Trump's interfering with the Fed's ability to do what it thinks is best for the long run good of the economy could create higher inflation or economic instability. "Since inflation was cooling at the beginning of the year, the Fed would have increased the money supply to cut short-term interest rates by now if the tariffs had not been implemented in February" said Frazier. Many believe tariffs imposed by Trump have had negative implications for the economy. Currently both the interest and unemployment rates are just above 4%. The Fed's goal is to bring inflation rates down to 2%. Joblessness figures between 4% and 5% are considered full employment. Feuding between presidents and Fed chairs is nothing new. Presidents since the 1960s have put pressure on the central bank to lower interest rates to stimulate the economy and make presidents look good. Until Powell's term is up or he is fired there is not much Trump can do to directly influence the Fed. So what the president has done instead is to turn up the pressure on Powell, by looking for his replacement months in advance. Perry Haan is a professor of Marketing at Tiffin University. He can be reached at haanpc@tiffin.edu.