Key Takeaways
- President Trump’s repeated calls for Federal Reserve rate cuts and attempts to replace Chair Jerome Powell have been undermined by his own policy actions.
- Aggressive tariff escalation and the US‑Israeli conflict with Iran have raised inflation, prompting the Fed to pause or consider rate hikes rather than cuts.
- Legal efforts to remove Powell and Governor Lisa Cook lack merit; courts have repeatedly blocked subpoenas and indicated Trump would likely lose any removal battle.
- Powell’s strategy of non‑engagement and reliance on statutory protections has kept him in office, despite political pressure.
- The Fed’s current stance is to remain on hold for an extended period, with officials warning that lasting oil‑price shocks from the Iran conflict could force a rate increase.
- Trump’s broader “war on the Fed” may backfire, costing him the policy easing he seeks while strengthening the central bank’s independence.
President Donald Trump has spent much of his second term demanding lower interest rates and pushing for the removal of Federal Reserve Chair Jerome Powell. Yet his own policy moves have made those goals increasingly unattainable. Early in his administration Trump launched a sweeping series of tariffs on imports, which lifted prices on a wide range of goods and contributed to a noticeable uptick in inflation. He has signalled that further tariff increases are still on the table, aiming to restore the effective duty rates that existed before a Supreme Court decision struck down certain measures.
Compounding the inflationary pressure, Trump’s decision to back a joint US‑Israeli military operation against Iran in late February triggered a closure of the Strait of Hormuz. Roughly 20 % of global oil shipments—along with other vital commodities—traverse this waterway, and its disruption has sent energy prices soaring worldwide. The latest Consumer Price Index showed that US inflation jumped threefold in March, a direct consequence of the oil‑price shock. Although Powell initially characterised the war’s impact as temporary, the strait remains blocked weeks later, and Fed officials now view the inflationary surge as more persistent.
In response, the Federal Reserve has adopted a cautious stance. At its March meeting, Powell indicated that any rate cuts would be postponed until the central bank could see three consecutive months of declining inflation—a condition that has not yet materialised. Cleveland Fed President Beth Hammack told CNBC that the Fed is likely to stay on hold “for a good while,” echoing the sentiment of other regional presidents who hold voting power this year. Treasury Secretary Scott Bessent has publicly agreed that the Fed should wait for clearer data before acting.
Trump’s efforts to pressure the Fed extend beyond economic policy. He has repeatedly threatened to fire Powell if the chair does not step aside when his term ends, and he has sought to remove Governor Lisa Cook over unsubstantiated mortgage‑fraud allegations. These actions have sparked legal confrontations. Powell has refused to engage directly with the president, reiterating that removal would be illegal and noting that, under the Federal Reserve Act, he would continue to serve as chair “pro tempore” until a Senate‑confirmed successor is named. Courts have largely sided with Powell: a federal judge quashed subpoenas issued by DC US Attorney Jeanine Pirro, who was probing Powell’s testimony about the Fed’s headquarters renovation. Pirro has signalled an intention to appeal, but the ongoing investigation has stalled Trump’s nomination of former Fed governor Randy Warsh, as Senator Thom Tillis (R‑NC) refuses to vote for Warsh unless the Powell probe is dropped.
Similarly, the attempt to oust Cook appears unlikely to succeed. The Justice Department is still reviewing the mortgage‑fraud allegations but has not filed any charges; legal observers anticipate that Trump would lose in court if he pursued removal. Former Fed economist Skanda Amarnath summed up the situation, stating that Trump “is already losing in court in his attempt to fire Governor Lisa Cook and will likely lose again if he tries to fire Chair Powell.”
Altogether, Trump’s combination of protectionist trade measures, geopolitical escalation, and direct attacks on Fed leadership has produced exactly the opposite of what he wanted. Instead of securing easy monetary easing, he has contributed to higher inflation, discouraged the Fed from cutting rates, and heightened the prospect of a future rate hike if oil‑price pressures persist. The Fed’s independence, reinforced by judicial rulings and Powell’s restrained response, remains intact, leaving the president’s agenda frustrated and the central bank on a path of caution rather than accommodation.