#TrumpVsPowellPresident Trump surprised this week by declaring that he never planned to fire Fed Chairman Jerome Powell, while accusing the media of creating a misleading story about his intentions to remove the head of the U.S. central bank. However, behind the scenes at the White House, the story is much more complicated and reveals the simmering tensions between the administration and the Fed.

U.S. President Donald Trump

According to informed sources, some senior officials have seriously considered Trump's recent public statements about ending Powell's term. As the president's criticisms of the Fed chairman escalated last week, White House lawyers quietly explored legal options for firing Powell, including the possibility of citing "just cause" - a condition stipulated in the law establishing the Fed. Current law states that Fed Governors can only be removed before the end of their term for just cause, which courts generally interpret as misconduct or incompetence. Seeking a pretext to fire Powell would put the White House in an unprecedented confrontation with the central bank - a scenario that could have severe consequences for the financial markets.

"This is the perfect time to lower interest rates. If he doesn't do that, is that the end? No. Not at all," Trump shared with reporters in the Oval Office on the afternoon of April 22, softening the harsh statement he had repeated just a day earlier.

Again, it is the advice of Scott Bessent and Howard Lutnick. Behind this change is decisive intervention from two influential figures in the cabinet: Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick. These two have warned Trump that a move against Powell could trigger a shockwave in the financial markets and lead to a protracted, messy legal battle. Lutnick pointed out that even if Trump succeeded in removing Powell, it would be difficult to bring about any real changes to interest rates. This is because other members of the Fed board are likely to approach monetary policy in a similar way to Powell, making the entire effort futile but causing significant damage. Previously, Bessent and Lutnick had advised President Trump to delay counter tariffs for 90 days.


"The president has a great team of advisors providing counsel on many topics, but ultimately, the president is the decision-maker," White House spokesperson Taylor Rogers said, declining to comment on Trump's private conversations.

The president has a great team of advisors providing counsel on many topics, but ultimately, the president is the decision-maker," White House spokesperson Taylor Rogers said, declining to comment on Trump's private conversations. Besides reversing the decision regarding Powell, Trump also expressed a willingness to lower the 145% tax currently imposed on imports from China. These two concessions occurred just after he temporarily suspended several proposed tariffs for 90 days. Notably, these moves came right after an important meeting on April 21, when Trump hosted senior executives from major retailers like Target, Walmart, and Home Depot at the White House. During the meeting, they expressed deep concerns that the tariff policy, especially toward China, would push consumer prices higher and negatively impact ordinary Americans. Just a day later, Trump publicly acknowledged that the 145% tax is "very high" and promised it would be "significantly reduced." According to informed sources, administration officials are currently actively discussing the appropriate level of tax reduction. Elon Musk, CEO of Tesla and senior advisor to Trump, as well as head of the Department of Government Efficiency (DOGE), has also openly supported tax reduction. "Whether he listens to my advice is up to him," Musk shared during a financial results presentation on April 22. The billionaire also revealed that he would reduce his working hours with DOGE as Tesla is going through a difficult phase, partly due to the company's image being affected by Musk's association with the Trump administration. Meanwhile, most Wall Street analysts believe that even if Trump succeeds in removing Powell, it would be difficult to achieve the desired outcome of lower interest rates. Currently, there is no support within the 12-member Fed committee for a rate cut. The Fed cut rates by 1 percentage point last year when inflation cooled, but the current situation is different.

Fed Chairman Jerome Powell

The new tariffs have put monetary policymakers in a difficult position. On one hand, they are concerned that tariffs will push prices up and create a higher risk of inflation; on the other hand, these measures could ultimately slow spending and hiring, thereby weakening the economy. The importance of protecting the Fed's independence is illustrated by a painful historical lesson. In the 1970s, President Richard Nixon privately pressured Fed Chairman and his former advisor, Arthur Burns, to loosen monetary policy ahead of the 1972 election. Burns yielded, resulting in years of high inflation and a severe economic recession in the early 1980s. Tim Mahedy, chief economist at Access/Macro and former senior advisor at the San Francisco Fed, warned that the market's reaction if Powell were forced out "would be like an apocalypse." He predicted: "The pain would be so swift and severe that the president would be forced to retract immediately or face a systemic financial event." Meanwhile, Fed Chairman Powell maintains confidence in the institution. "The Fed's independence is very well understood and broadly supported in Washington, in Congress," he stated in Chicago last week. Nevertheless, he is also prepared to face the prospect of a legal showdown - possibly even having to bear the costs himself - if necessary to protect this important principle.

A particular challenge Trump faces in pushing the Fed to lower interest rates is his own personnel. Recently, the president promoted Michelle Bowman, the Fed Governor he appointed during his first term, to Vice Chair for Bank Supervision. Ironically, Bowman is one of the strongest officials warning about the risks of lowering interest rates too early or too quickly. The independence of the Fed is not only a matter of principle but also has a direct impact on market confidence. Bond investors on Wall Street consider this a "sacred" factor, and many foreign investors may refuse to buy U.S. Treasury securities if they fear the government will interfere with the Fed to tolerate higher inflation. The current confrontation between Trump and Powell is different from 2019 in two important ways. First, Trump has shown a greater willingness to disregard institutional and legal norms compared to his first term. Second, inflation may become a bigger issue this year due to Trump's tariffs being larger and broader, placing the Fed in a more difficult position after it has raised interest rates to the highest levels in two decades to curb inflation. Trump's decision to halt the intention to fire Powell - at least for now - may ease concerns in the financial markets. However, tensions between the White House and the Fed remain, and the likelihood of similar conflicts recurring is still very high in the coming months.