Federal Reserve Chair Jerome Powell is no stranger to irony. Few situations are more paradoxical than his repeated confrontation with the very president who appointed him. Powell was selected as Federal Reserve Chair by President Trump in 2018; however, in the years since, the two have clashed on numerous occasions. Most recently, Powell has become the subject of a federal investigation, further intensifying tensions between the administration and the central bank.
The investigation, which began on January 11, centers on planned renovations to the Eccles Building and the Federal Reserve property at 1951 Constitution Avenue. Although President Trump initially appeared supportive of these plans, he later raised concerns regarding the cost of the projects. On the contrary, many believe that the investigation stemmed from President Trump’s longstanding dissatisfaction with Powell’s approach to interest rates. Throughout his term, Trump criticized Powell’s decisions not to cut rates since the beginning of his term. He took this criticism so far as to insult Powell’s intelligence publicly to the Saudi crown prince. “He’s a fool. He’s a stupid man,” Trump said.
While unprecedented, the investigation was not entirely unexpected. Many political analysts anticipated a confrontation between President Trump and the Federal Reserve during his second term. Powell has consistently defended the importance of an independent central bank, a stance that directly conflicted with Trump’s belief that the president should play a greater role in monetary policy decisions. Although Powell approved three interest rate cuts, Trump deemed them insufficient, calling Powell “Mr. Too Late.” Regardless, the investigation caused a stir in Washington, with critics arguing that it reflects the administration’s desire to exert greater control over the Federal Reserve. Both Republicans and Democrats within Congress have condemned this move, including Thom Tillis, a Republican senator from North Carolina. “If there were any remaining doubt whether advisers within the Trump administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” Tillis said.
Despite bipartisan support, Powell is expected to step down in the coming months. In May, he is set to be replaced by a Trump appointee. Following the announcement of the investigation, several prominent figures voiced their support for Powell, including his predecessor, former Federal Reserve Chair Janet Yellen. “Knowing Powell as well as I do, the odds that he would have lied are zero so I do believe they’re going after him because they want his seat and want him gone,” Yellen said.
The probe represents a notable departure from political norms, and Powell’s resignation now appears all but inevitable.
