PROVIDENCE, RI – As President Donald Trump continues to threaten to illegally fire Federal Reserve Chair Jerome H. Powell unless he prioritizes Trump’s political preferences over responsible economic policy, U.S. Senator Jack Reed (D-RI), a member of the Senate Banking, Housing and Urban Affairs Committee, is warning that Trump’s irresponsible rhetoric is doing financial harm to American families, businesses, and the U.S. economy.

“Donald Trump is a one man financial crisis.  He inherited a strong, growing economy and has senselessly decimated it with irrational tariff taxes and reckless threats to obliterate the Fed’s independence.  So far, Trump’s economic policies have been a disaster for Main Street and a nightmare for Wall Street.  And now, he wants Chair Powell and the Fed to prioritize his political concerns over economic reality by cutting rates and increasing inflation in order to stimulate the economy he is wrecking.  He needs to reverse course and responsible people across the political spectrum need to speak up or risk having him politically interfere in monetary policy and cause very bad financial outcomes for all Americans,” said Senator Reed.

As Fed Chair, Jerome Powell is statutorily tasked with achieving the Fed’s dual mandate of stable prices – low inflation – and maximum employment.  This task has been made more difficult by President Trump’s tariff taxes, which researchers at Yale have found will raise inflation from 2.5% today to around 5.5% in the coming months. 

Last week, during a speech outlining his economic outlook, Chair Powell noted that the President’s tariffs will raise prices and impact how the Fed works to achieve its dual mandate – something economists and analysts across the political spectrum have warned for months.  Seemingly in response, President Trump said he’s not happy with Powell and declared that he has the power to replace him. “If I want him out, he’ll be out of there real fast, believe me,” Trump said. “I’m not happy with him.”  Trump later called on the Fed to cut interest rates while admitting his policies are slowing the economy, writing the Fed needs to make “Preemptive Cuts” to interest rates, and “there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”

Senator Reed warns it could be “catastrophic” for the U.S. economy if President Trump tries to fire Fed Chair Powell to get the Fed to cut interest rates.

“When President Nixon strong-armed the Fed to keep rates low and help his re-election efforts, inflation skyrocketed in part because the Fed was slow to react to raising prices.  Inflation eventually reached nearly 15% and the Fed was forced to push the U.S. into a deep recession in order to lower prices.  One of the main lessons of this was crisis was that our central bank must be independent of politics – that is part of what keeps our economy strong, stable, and attractive to investors.  It would be catastrophic if Powell gave in to Trump’s threats or if Trump tries to fire Powell, whose job is to tune out politics and keep the U.S. economy on the right course.  That would risk a return to sky-high inflation and do severe, permanent harm to the financial well-being of all Americans.”

“Instead of pressuring Powell, President Trump should stop pursing an irresponsible tariff agenda that is pushing up prices for hardworking Americans.  Trump’s threats have already roiled financial markets.  If he goes further, the harmful effects will spread to families and businesses.

Under current law, the President is not allowed to fire the Fed Chair for political reasons.  The Federal Reserve Act of 1913 establishing the Fed stipulates that members of its Board of Governors, appointed by the president and confirmed by the U.S. Senate to staggered 14-year terms, can only be removed for “cause” – which experts widely agree only means misconduct, not policy disputes or for political favor.

In 2017, Trump nominated Powell to a four year term as Fed chair.  He was later reappointed by former President Biden.  Powell, who also served as Under Secretary of the U.S. Department of the Treasury under President George H.W. Bush, has explicitly said he would not step down as Fed chair if Trump asked him.

Powell’s tenure as Fed Chair runs through May 2026, which means President Trump could replace him then.  The U.S. Senate must vote to confirm the Chairman of the Federal Reserve.