Can a President of the United States fire the chief of the Federal Reserve? It's a question that until recently hadn't been asked. But there are worries about President Donald Trump’s anger at Federal Reserve Chair Jerome Powell who Trump criticized again last week for not cutting interest rates sooner, and calling him "a major loser" on Monday.
"So, there is supposedly a sort of like an understanding that the Federal Reserve is an independent agency," says CBS News Business Analyst Jill Schlesinger. "And as a result, the president may not like the Fed, may do something called jawbone the Fed, like basically talk trash about the Fed and the Fed chair. But each Fed official serves a seven-year term. If you're the chairman, it's a four-year term, and that the president cannot remove that person. So, Jerome Powell, who's our current Fed chair, is up for his term will be up next May, so May of '26, and even if he were to no longer be the Fed chair, he would still be serving his official term."
That ostensibly means that no, you can't fire a Fed chair and also that Fed terms are not something a president can change. And that the Fed remains independent. Right?
"That of course can all change," Schlesinger explains. "I am clear that this president does tend to push the boundaries. So, if he tries to actually fire Jerome Powell, that's going to land in the Supreme Court."
Should it get to that level, it would certainly become a landmark ruling for the future of the government and the power of the presidency.
"I think that the hope would be that the Supreme Court would want to make it an institutionalist body, would basically stick to the Fed is independent," Schlesinger says. "But again, you know, this is a very different time horizon and we'll see."
Schlesinger adds that the job of the Fed chair is very different from a political position like the president.
"This Fed chair has been resolute and saying last week, he spoke, he said, 'you know what, I don't know how all of these tariffs are going to play out. We think prices are going to rise. We are not clear what that means for policy,'" Schlesinger told the WCCO Morning News with Vineeta Sawkar.
A large part of the issue is the tariffs the Trump Administration has put in place, threatened to put in place, placed then removed, and the uncertain economic impacts of those move.
"The Fed has two main jobs," says Schlesinger. "One part of the job is it's supposed to make sure that there are enough jobs for anyone who wants a job, so foster economic growth, so there's job creation. On the other side, the Fed's other part of their dual mandate is to essentially try to control price increases and really attack inflation when it comes up. So the problem with these tariffs is it could slow down the economy, which would not be good for jobs, but it can also lead to higher prices. And the question is whether or not this Federal Reserve will deem one side more important than the other, and they basically say, we don't know because we haven't seen the total impact."
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Markets again react with sharp downturns
Monday, U.S. stocks are tumbling again as worries about President Trump’s trade war and his criticism of the Federal Reserve cause investors to pull further from the United States.
The S&P 500 was 3% lower in another wipeout, and the index at the center of many 401(k) accounts is more than 16% below its record set two months ago.
The Dow Jones Industrial Average was down 1,100 points, or 3%, as of 1:45 p.m. Eastern time. Tesla and other Big Tech stocks had some of the sharpest losses, which dragged the Nasdaq composite down a market-leading 3.5%.
Perhaps more worryingly, the value of the U.S. dollar also sank as a retreat continues from U.S. markets. It’s an unusual move because the dollar has historically strengthened during past episodes of nervousness. But this time around, it’s policies directly from Washington that are causing the fear and potentially weakening the dollar's reputation as a pillar of the global economy.
Trump continued his tough talk on global trade over the weekend, even as economists and investors continue to say his stiff proposed tariffs could cause a recession if they’re not rolled back. U.S. talks last week with Japan have so far failed to reach a deal that could lower tariffs and protect the economy, and they're seen as a “test case,” according to Thierry Wizman, a strategist at Macquarie.
“The golden rule of negotiating and success: He who has the gold makes the rules,” Trump said in all capitalized letters on his Truth Social Network. He also said that “the businessmen who criticize tariffs are bad at business, but really bad at politics,” likewise in all caps.
Trump has recently focused more on China, the world’s second-largest economy, which upped its own rhetoric against the world’s largest economy. China on Monday warned other countries against making trade deals with the United States “at the expense of China’s interest” as Japan, South Korea and others try to negotiate agreements.
“If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner,” China’s Commerce Ministry said in a statement.
Also hanging over the market are worries about Trump’s anger at Federal Reserve Chair Jerome Powell. Trump last week criticized Powell again for not cutting interest rates sooner to help give the economy more juice.
The Fed has been resistant to lowering rates too quickly because it does not want to allow inflation to reaccelerate after it has slowed nearly all the way down to its 2% goal from more than 9% three years ago.
Trump talked again on Monday about a slowing for the U.S. economy that could be coming unless “Mr. Too Late, a major loser, lowers interest rates.”
A move to fire Powell would likely send a huge bolt of fear through financial markets. While investors always love lower interest rates, because they boost prices for stocks and other investments, the larger worry would be that a less independent Fed would be less effective at keeping inflation under control in the long run. Such a move could further weaken, if not kill, the United States’ reputation as the world’s safest place to keep cash.
On Wall Street, several Big Tech stocks helped lead indexes lower ahead of their latest earnings reports due later this week.
Tesla sank 7%, for example. The electric vehicle’s stock came into Monday roughly 50% below its record set in December on criticism that its stock price had gone too high and that its brand has become too entwined with Elon Musk, who’s leading the U.S. government’s efforts to cut spending.
Nvidia fell 5.6% and was on track for a third straight drop after disclosing that new U.S. export limits on chips to China could hurt its first-quarter results by $5.5 billion. It was the single heaviest weight on the S&P 500 500. A 3.5% drop for Apple, 2.5% fall for Microsoft and 3.6% slide for Amazon were close behind.
It was another wipeout on Wall Street, and 97% of the stocks within the S&P 500 were falling.
Among the few gainers was Discover Financial Services, which climbed after the U.S. government approved its proposed merger with Capital One Financial.
Discover rose 1.7%, while Capital One edged down by 0.3%.
Gold was also rising, burnishing its reputation as a safe-haven investment, unlike some others.
In the bond market, shorter-term Treasury yields fell as investors keep alive hopes that the Fed may cut its main overnight interest rate later this year in order to support the economy.
Longer-term yields swiveled up and down, though, as doubts continue to rise about the United States' standing in the global economy because of Trump's moves.
The yield on the 10-year Treasury topped 4.40% in the morning, up from 4.34% at the end of last week and from just about 4% earlier this month. That’s a substantial move for the bond market. But it later regressed back to 4.36%.
The U.S. dollar’s value, meanwhile, fell against the euro, Japanese yen, the Swiss franc and other currencies.
In stock markets abroad, Tokyo’s Nikkei 225 fell 1.3%. Indexes fared better in Seoul, where stocks rose 0.2%, and in Shanghai, which saw a 0.4% gain.
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