President Donald Trump has intensified his criticism of Federal Reserve Chair Jerome Powell as the Supreme Court mulls over a case that could allow the president to remove him. The attacks come amidst economic turmoil caused by Trump’s tariffs on imports, adding to uncertainty in the markets. Trump has voiced dissatisfaction with Powell for not cutting interest rates more aggressively. The Fed’s independence is crucial to most economists, as it allows the institution to make unpopular decisions like raising interest rates to combat inflation.
The importance of an independent Fed was solidified after the inflation spike in the 1970s and 1980s. Wall Street investors prefer an independent Fed for its ability to manage inflation and make predictable decisions. While the president can appoint Fed chairs and board members, they serve staggered terms, limiting the immediate impact of presidential appointments on Fed policies. If Trump attempts to fire Powell, it could lead to a legal battle that may end up in the Supreme Court. The outcome of the case could have significant implications for the Fed’s independence.
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