The first months of Donald Trump’s second term will have confirmed it: to oppose an end of inadmissibility to the republican billionaire amounts to exposing reprisals. The latest to have experienced it is undoubtedly, none, Jerome Powell, the owner of the Fed, the American central bank. Donald Trump has been the press as a lemon for several weeks to tear him down a drop in interest rates, going so far as to brandish the threat of dismissal.
The noose was still tightened this week after Jerome Powell denounced the misdeeds of Donald Trump’s protectionist trade policy on Wednesday. “Customs duties will most certainly have at least one temporary increase in inflation” with the possibility that “inflationary effects are also persistent”. In the process, Donald Trump hastened to publish a new spike on his Truth Social Pin against his Truth Social Platform against the President of the Fed, which he himself appointed, seven years earlier: “It is more than time that Powell’s mandate ends.”
Alongside the Italian Prime Minister, Giorgia Meloni, whom he received in the oval office on Thursday, Donald Trump returned to the charge, accusing Jerome Powell of “doing politics” with interest rates. “I’m not happy with him. I let him know and if I want him to leave, he will go quickly, believe me”. And to once again enjoin the president of the Fed to “lower interest rates”, then taking the European Central Bank (ECB) as a model, which made its key rates back up a quarter of a point on Thursday. This Friday, the White House officially announced to study the possibility of dismissing Jerome Powell.
Powell summoned to serve the Trump agenda
An obsession that is not unrelated to the mid-term elections scheduled for the end of 2026. By lowering the rates, Donald Trump hopes to breathe an accelerator into the economy before the next election. And for good reason, lower rates, it is a cheaper credit for households as well as for businesses, therefore more consumption, more investments. Such a maneuver would also reduce the cost of debt load and loosen the budgetary constraint. In filigree, the advantage would be just as political as it is economic.
Problem: this growth would mainly be a trompe-l’oeil, a kind of artificially doped upturn. Not to mention that by making money more accessible, a decrease in rates would inevitably cause prices, and would thus risk reviving inflationist embers, barely contained. It is also to guarantee price stability that the Fed has maintained since the start of the year, its main stable rates between 4.25 % and 4.50 %. Suffice to say that the undesirable effects of such a maneuver are no longer a simple hypothesis, but rather of the largely anticipated scenario.
The independence of the Fed put to the test
Behind economic risks, it is an institutional principle that vacillates. By threatening Jerome Powell, Donald Trump’s independence, ignores the independence rule of the American central bank established in the 1980s following a period of high inflation in the previous decade. Independence, which as pointed out THE Washington Post“also protects the political personnel from the responsibility of unpopular decisions taken (by the Fed) to combat inflation”. Before him, no other President of the United States has never tried to release a Fed governor.
The absence of a precedent only adds to the confusion which surrounds a possible revocation of Jerome Powell. If Donald Trump swears, all round, hold full powers to dismiss him, the lawyers, they remain divided. And for good reason: behind the scenes, the leaders of the Fed have already prepared for this scenario. As of 2018, they had noted that in the event of questioning the legitimacy of Jerome Powell by the administration, the committee responsible for rates, the Federal Open Market Committee (FOMC) would meet without delay to renew it at the head of the institution.
A dismissal that divides into the Trump camp
In other words, even officially dismissed, Jerome Powell would remain in charge of the Fed, while a possible criminal show will follow its course-and it could last beyond the end of his mandate, in May 2026. What to destroy the cost-benefit report of an attempted dismissal. This is why several members of Donald Trump’s entourage argue in favor of maintaining Jerome Powell.
Starting with his secretary to the Treasury, Scott Bessent, who reaffirmed this week his attachment to the independence of the first of the central banks. Kevin Warsh, the former Fed governor from 2006 to 2011, that Donald Trump plans to appoint Jerome Powell, also tried to dissuade the Republican from revoking his successor. A way to preserve the pressures of the cantor of “the America First” once in office?