Trump has repeatedly expressed dissatisfaction with Federal Reserve Chair Powell, even publicly stating a desire to fire him, mainly for the following reasons:
1. Differences in Monetary Policy
Dissatisfaction with Interest Rate Cuts: Trump has long criticized the Federal Reserve's interest rate hike policies, believing that high rates hinder economic growth, especially placing pressure on manufacturing and exports. He has repeatedly called for the Federal Reserve to lower interest rates to stimulate the economy, but the Fed under Powell has taken a relatively cautious stance in addressing inflation and economic growth, not fully meeting Trump's expectations for rate cuts.
Controversy Over Independence: Trump believes that the Federal Reserve should more directly align with the government's policy goals, especially by supporting economic growth through loose monetary policy. However, the Federal Reserve insists on independent decision-making and refuses to adjust policies due to political pressure, exacerbating the conflict between the two sides.
2. Tariff Policies and Economic Impact
Questioning the Effects of Tariff Policies: The high tariff policies implemented by Trump are viewed by some economists as potentially raising inflation, while the Federal Reserve may be forced to maintain high interest rates to combat inflationary pressures. Trump believes that Powell has failed to effectively align with his trade policies, even accusing the Fed's tightening policies of undermining the effectiveness of the tariff policies.
Dispute Over Economic Data: Powell has publicly stated that Trump's tariff policies may have negative effects on the economy, including raising inflation and suppressing investment. This public disagreement has further intensified the conflict between the two.
3. Political and Personal Factors
Political Motives: Trump may be attempting to influence economic data by intervening in Federal Reserve policy, thereby creating favorable conditions for his political agenda (such as re-election). Firing Powell and appointing a more 'compliant' Federal Reserve Chair may be seen as a means to achieve this goal.
Personal Grievances: Trump's public conflict with Powell has a long history, with their opposing policy positions gradually evolving into personal grievances. Trump has publicly criticized Powell multiple times, even comparing him to ECB President Lagarde, accusing him of being 'slow to act.'
4. Challenge to the Independence of the Federal Reserve
Attempts to Undermine Independence: Trump has repeatedly questioned the independence of the Federal Reserve and even proposed reforms to it. Firing Powell may be viewed as a step to undermine the Fed's independence and enhance presidential control over monetary policy.
Legal and Procedural Obstacles: Under U.S. law, the term of the Federal Reserve Chair is fixed at four years, and the president does not have the authority to dismiss them arbitrarily. Trump's threat to dismiss is more about political pressure than a viable administrative action.
5. Economic Performance and Public Opinion Pressure
Economic Data and Policy Effects: Trump may believe that the Federal Reserve's policies have failed to effectively boost the economy, especially in key indicators such as employment, inflation, and economic growth. He attempted to divert public attention from economic issues by firing Powell or blaming poor economic performance on the Federal Reserve.
Public Opinion and Voter Pressure: Among Trump's supporters, some believe that the Federal Reserve's policies are detrimental to the economy. Trump may cater to the sentiments of this segment of voters through a tough stance, consolidating his political base.
Background and Impact
Historical Precedent: Trump is not the first president dissatisfied with the Federal Reserve Chair, but the frequency and intensity of public pressure and threats of dismissal are relatively rare. Such actions have raised market concerns about the independence of the Federal Reserve, potentially leading to volatility in financial markets.
Legal and Procedural Constraints: Despite Trump's repeated expressions of dissatisfaction, firing Powell faces legal and procedural hurdles. The independence of the Federal Reserve is protected by law, and the president does not have the authority to dismiss the chair at will.
Summary
The core reason Trump wants to fire Powell lies in the profound differences in monetary policy between the two and the challenge to the independence of the Federal Reserve. Trump believes that the Fed's policies have failed to effectively support his economic and political goals, attempting to influence the Fed's decisions through pressure or personnel changes. However, this attempt faces legal and procedural limitations and may negatively impact financial markets and economic stability.