What does Trump want Jerome Powell to do?

President Donald Trump wants Jerome Powell to cut the interest rates. Trumps cites that there is “virtually no inflation” and the energy cost is coming down. Trump has warned that the US economy could slowdown if the interest rates are not brought down immediately. He has also made comparison stating that Europe has cut rates seven times.

The European Central Bank (ECB) has cut its refinancing rates from 4.5 per cent to 2.4 per cent. The US Federal Reserve’s interest rate has come down from the range of 5.25-5.5 per cent to 4.25-4.5 per cent.

What is Powell’s stance?

Jerome Powell has clearly said that the central bank will act independently without any political influence and focus on its dual mandate which is, maximum employment and stable prices.

In its recent meeting in March Powell has raised concerns about increasing inflation in the first two months of this year. The Fed had raised their inflation forecast for 2025 to 2.8 per cent from 2.5 per cent projected earlier. He also said that tariff and nontariff inflation will have to be worked out.

So, unless the Fed gets a clarity on the actual impact of the tariffs on inflation, it may not be in a hurry to cut rates immediately

Why is the dollar weakening because of this tussle?

Interest rates of a country is one of the major drivers of its currency. Higher the interest compared to other countries, that is the interest rate differential, stronger will be the currency and vice-versa. Since Trump is insisting for lower interest rates, the dollar is weakening now. Also, Trump threatening to fire Jerome Powell is making the investors to lose confidence.

This coupled with the uncertainty on the tariffs has reduced the safe-haven status on the dollar and the market is now shifting towards the other safe assets such as gold and Yen.

What will be likely outcome of this on the dollar going ahead?

For now, the dollar is likely to remain weak. As indicated in its March meeting, we will have to wait for the Fed to come out with clarity on the actual impact of tariff on inflation. That we will be able to know only in June when the Fed releases its next economic forecast. Until then the dollar is likely to remain subdued.

Going by the charts, technically, the dollar index which is currently at 98.35 has room to test 96. It will be important to see whether it is managing to bounce back from there or not.

What does the law say on the President firing the US Fed Chairman?

According to the law, the US President can fire any Commissioner only in the following cases – inefficiency, neglect of duty or malfeasance (wrongdoing). So, unless Powell is charged and proved under any of the above-mentioned three scenarios, Trump cannot fire Powell.

Jerome Powell’s tenor is officially ending in May 2026.

Published on April 22, 2025