One day after Jerome Powell warned that legal attacks on the Federal Reserve are "battering the institution," President Donald Trump returned to the offensive on Thursday.
Asked by reporters whether he was prepared to take action against Powell remaining on the Board of Governors after his chair term ends May 15, Trump dismissed the idea. According to Trump, he does not care if Powell stays, having predicted as much because "who's going to hire him, frankly."
Trump called Powell "a negative force" and said the renovation cost angered him more than rates ever did. Per Trump, he could have renovated the Fed building for $25 million; instead, the project may run close to $4 billion and remains unfinished.
The president then pivoted to his successor pick. Trump said Kevin Warsh — who cleared the Senate Banking Committee on Wednesday morning on a 13-11 vote — is "going to be fantastic" and joked that if Warsh has nowhere to work, he will give him an office at the White House. Per Trump, he might "cut the Oval in half" to make room.
Powell's Warning From 24 Hours Earlier
The comments sit in direct tension with what Powell said 24 hours earlier. In his final press conference as chair, Powell said Fed independence is "at risk" and described the administration's legal actions against the central bank as unprecedented in the institution's 113-year history.
According to Powell, he had long planned to retire when his chair term ended, but developments over the past three months left him no choice but to remain on the Board.
Powell's defense of Fed independence was crucial. Every major advanced economy separates monetary policy from elected politicians because politicians, always running for the next election, will always want low rates — a path that leads to inflation over time. The four-decade run of contained inflation that ended with the pandemic, he suggested, was the dividend of that arrangement.
Powell indicated that what matters is not the abstract principle of an independent institution but the concrete benefit: interest rates set to achieve maximum employment and price stability, with political considerations ignored completely.
