President Donald Trump intensified his criticism of the Federal Reserve this week, openly threatening to remove Chair Jerome Powell if the central bank refuses to implement interest rate cuts. The comments mark a dramatic escalation in Trump’s long-standing feud with the Fed and raise serious concerns about the institution’s political independence.

“If I want him out, he’ll be out of there real fast, believe me,” Trump declared Thursday, taking direct aim at Powell, who is currently serving his second four-year term, set to end in May 2026.

Trump has repeatedly pushed for rate cuts to stimulate economic growth amid his proposed tariffs on imports. However, analysts warn that such aggressive political interference in monetary policy could undermine market confidence and destabilize the U.S. financial system.

Federal Reserve Chair Jerome Powell responded firmly, stating he has no intention of resigning and reaffirming the Fed’s independence as a legal necessity. “Independence over monetary policy is a matter of law,” Powell said this week.

Economists Warn of Dangerous Precedent

Top economists say the clash could rattle markets and threaten the credibility of the Fed. Stephanie Roth, chief economist at Wolfe Research, predicted continued conflict between the White House and the central bank.

“I don’t think the Fed is going to succumb to political pressure,” Roth noted, warning that rate cuts prompted by political demands rather than economic data would be “a recipe for disaster.”

KPMG’s chief economist Diane Swonk said Powell’s public defense of Fed independence underscores the seriousness of the situation. “Clearly, the fact that the Fed chairman feels that he has to address it means that they are serious,” she told reporters.

Tariff Plans Could Fuel Inflation, Complicating Rate Cuts

Trump’s proposed 10% “baseline” tariff on imports from most countries could drive inflation higher and dampen economic growth in the near term, according to most economists. This scenario makes rate cuts less likely, as the Fed aims to keep inflation near its 2% target.

“The Fed isn’t going to react just because Trump says they should cut rates,” Roth emphasized.

Legal and Market Barriers to Removing Powell

Legal scholars widely agree that the president lacks authority to fire the Fed chair without cause. The Federal Reserve, established over a century ago, was explicitly designed to shield monetary policy from political influence.

“Independence is absolutely critical for the Fed,” Roth said. “Countries without independent central banks suffer from weaker currencies and higher interest rates.”

Moody’s Analytics chief economist Mark Zandi echoed the warning: “We’ve had strong evidence that impairing central bank independence is a really bad idea.”

Bond Markets May Serve as Final Guardrail

A legal case pursued by the Trump administration aims to challenge a 1935 Supreme Court ruling that protects the heads of independent agencies from being dismissed without cause. If successful, the case could impact the Fed’s leadership structure—but experts say the bond market could be an even more formidable barrier.

During recent market volatility triggered by Trump’s tariff announcements, U.S. Treasury yields spiked and the dollar weakened, prompting the White House to temporarily pause its tariff plans. Such reactions reflect investor unease with any threats to the Fed’s credibility.

“You can’t control the bond market. And that’s the moral of the story,” said Swonk. “That’s why you want an independent Fed.”