Trump's Push to Dismiss Federal Reserve Chair Sparks Economic Concerns

US President Donald Trump has set his sights on Jerome Powell, the Chair of the Federal Reserve, expressing a desire to remove him from his position. This move comes amid Trump's dissatisfaction with Powell's reluctance to lower interest rates, a strategy that Trump believes would facilitate easier access to affordable loans for businesses and developers.

According to advisors close to Trump, he is exploring options to expedite Powell's removal, despite constitutional concerns surrounding such an action. Economic experts warn that this could plunge the United States into a significant economic downturn.

On April 18, Kevin Hassett, an economic advisor at the White House, discussed the potential for Powell's dismissal, stating that the president and his team are continuing to evaluate the situation. Trump has accused Powell of engaging in political maneuvering by not reducing interest rates, asserting that he has the authority to swiftly remove him.

In a previous publication, Hassett had cautioned against dismissing Powell during Trump's first term, arguing that it could undermine the reputation of the Federal Reserve and the credibility of the US dollar. However, he has since indicated that changes in market conditions may necessitate a reassessment of that stance.

Powell has consistently emphasized the independence of the Federal Reserve, asserting that his removal would not be legally feasible. He aims to serve until the end of his term in May 2026, regardless of any pressure from Trump to resign.

If Trump is successful in replacing Powell with a loyalist, the consequences for the US economy could be dire. Trump's ongoing trade war and tariffs have already contributed to rising inflation, and lowering interest rates could exacerbate this trend, leading to even higher inflation rates.

Historical examples, such as the inflation crisis in Turkey, underscore the risks associated with ignoring economic fundamentals. In Turkey, inflation soared above 80% before the government took steps to raise interest rates. President Recep Tayyip Erdogan had previously prohibited the central bank from increasing rates, resulting in severe economic repercussions.

Some analysts speculate that if faced with escalating inflation, Trump might resort to implementing price controls. Economists like Jens Südekum have suggested that following Powell's dismissal, Trump could impose price ceilings on essential goods, particularly in grocery stores. Such government interventions carry the risk of driving companies out of the market or giving rise to black markets.

Currently, Trump has voiced concerns over the rising costs of food, with egg prices nearly doubling from $5 to almost $7 per dozen since January. Despite these increases, he has claimed that food prices are falling, a statement that contradicts the experiences of consumers and economic analysis.

Experts agree that Trump's tariffs are contributing to broader price increases across various sectors, not just limited to specific items. Notably, economist Isabella Weber has pointed out that the impact of these tariffs extends beyond localized price spikes, affecting numerous industries.

In light of these developments, the economic landscape in the US remains uncertain, with concerns mounting over the potential consequences of Trump's actions regarding the Federal Reserve leadership.