“Stupid”, “terrible”, “incompetent” – US President Trump covers central bank boss Powell with insults. Does he soon announced a successor to the top of the Federal Reserve?
Donald Trump seems to know no limits to the decency in his anger about the interest rate policy of Federal Reserve boss Jerome Powell. Again and again the US President has publicly insulted Powell in recent weeks and months and questioned his skills as President of the US Federal Reserve.
Powell’s tenure runs until spring 2026
The fact is: Trump wants to get rid of Powell – and apparently it faster than expected. So recently reports came up that Trump might soon be able to announce a successor to Jerome Powell. According to the “Wall Street Journal”, it could be so far in September or October, even an even earlier announcement in summer is possible. Powell’s term of office runs until May 2026.
The great danger is: Trump could make Powell a “lame duck” in the last months of his term, disempower him by a “shadow-fed boss”-and thus arouse doubts about the independence of the US Federal Reserve.
U.S. President Trump claims to have several people in mind as the successor to the central bank manager Powell, which he sharply criticized. “I know three or four people from whom I will choose,” said Trump during the NATO summit in the Hague.
According to the “Wall Street Journal”, Trump has an eye on the former FED governor Kevin Warsh, director of the National Economic Council Kevin Hassett and Finance Minister Scott Bessent as a candidate. Other candidates are the former World Bank President David Malpass and Fed Governor Christopher Waller.
The independence of the Fed is so important
The independence of the Fed is a relatively modern concept. In the 1970s, President Richard Nixon put pressure on Fed Chairman Arthur Burns at the time to keep interest rates low despite high inflation risks-with devastating consequences for the US economy.
Since then, the independence of the FED has been considered almost inviolable. It is the basis for the status of the dollar as a world reserve currency and for the attractiveness of US state bonds as a “safe haven”. Even the smallest doubts about the independence of the Fed could therefore lead to massive faults on the global stock exchanges – and the USA deprive the possibility of refinancing its gigantic high public debt of currently over $ 37 trillion dollars over the capital markets.
At the beginning of his second term, Trump had heated up speculation that he could fire Powell, but then quickly rejected this idea. Powell argued that such a process was “not permitted by law”.
In fact, no Fed chairman was ever released by a president. Even if the legal situation is not completely clear, there are good reasons why in such a case of the Supreme Court, the special status of the Fed would confirm as an independent authority.
In the precedent “Humphrey’s Executor vs. United States”, the Supreme Court decided in 1935 that a president should not be released by a member of an independent US federal authority without an important reason. The politically motivated dismissal of the FTC boss William Humphrey, an opponent of the “New Deal”, was therefore not permitted by President Roosevelt.
Self -proclaimed “Low interest type”
So why does Trump play with the fire? Why does he risk losing the trust of investors in the dollar and US state bonds and possibly triggering a global financial crisis in the end?
The background is the interest rate policy of Fed boss Powell, which does not meet the wishes of the US president. Trump started in the election campaign as a self -proclaimed “low interest type” (“low interest guy”): he promised interest reductions “as you have never seen it before”.
Impending inflation from customs policy
However, the Fed reduced the US key interest rate in December 2024. Since Trump took office in January 2025, the currency keepers shy away from further interest rate cuts – not despite, but because of Trump. After all, according to economists, the customs policy has the potential to massively drive consumer prices in the United States.
Keeping the FED still stirs up the US president’s anger. The consequence: more and more and more sharper insults. Trump recently described the central banker as a “very stupid person”. Powell is “terrible” and has a “low IQ”. “We will pay for his incompetence for many years.”
Interest speculation Add back
With the reports on the early announcement of a successor for Powell, the interest speculation recently started driving again at the financial markets.
According to the Fed Watch Tool of the CME Group, most market participants continue to expect an interest reduction only for the meeting in September – however, the shares have shifted significantly. 90.8 percent now assume an interest rate reduction in September. For comparison: a week ago it was only 64.0 percent.
Euro on course gene $ 1.18
The interest speculations put pressure on the dollar – in return the euro increases. The European Community Currency made up to $ 1.1742 yesterday and thus noted as high as since September 2021. Commerzbank passport expert Michael Pfister considers a further increase in the euro up to $ 1.18.
For consumers in this country, this is a positive message, as the strong euro presses the fuel prices at the petrol stations and thus also the inflation rate. However, if Trump sowed serious doubts about the independence of the US Federal Reserve, the pressure on the dollar continues to increase and even US state bonds in the pull of the Powell successor debate, then the consequences should go far beyond cheaper fuel prices.
Stability of the global financial system in danger?
Should the trust of the markets in the credibility and reliability of the US Federal Reserve erode, there would be no less than the stability of the global financial system at stake. Because the trust of investors in the dollar as a world reserve currency and in US state bonds as “safe port” is not a natural law.
Trump’s political tactics around the Fed lead is like a risky power game – with potentially devastating consequences not only for the largest economy in the world.
1970s as a deterrent example
History shows how it can end when president influence the central bank policy in the United States: Consumer prices in the 1970s, when Fed boss Burns bent the pressure from Nixon and kept the interest low, drastically up. At the end of the decade, the inflation rate was over 13 percent, while the growth of the United States was stagnating – so -called stagflation occurred.
It was only in the 1980s that this development was stopped by the new FED leader Paul Volcker: with drastic interest rate increases to over 20 percent. The “Volcker -Schock” triggered a severe recession, but was ultimately able to contain inflation – and restore the credibility of the Fed.
