Trump's Criticism of Powell and Controversy Over the Fed's Successor: A Political Test of Central Bank Independence

Introduction - Trump's Direct Criticism of Powell and Its Aftermath

In June 2025, former U.S. President Donald Trump publicly criticized Jerome Powell, the chair of the Federal Reserve, causing a stir in financial markets and political circles. Trump described Powell as "terrible" and "stupid," holding him accountable for the failure to shift interest rate policies, and stated that he is already considering 3 to 4 potential successors. This statement was interpreted as suggesting an unusual early nomination possibility, given that Powell still has about 1 year and 11 months left in his term. Trump has a history of overt dissatisfaction with the Federal Reserve's interest rate policies dating back to his presidency, and this recent remark is seen as a continuation of that attitude. The criticism is particularly rooted in the policy gap between his advocated stimulus measures and the maintenance of high interest rates. Such statements bring the debate over the Fed's independence back into the spotlight, raising the possibility that the Fed's policy direction and political neutrality could become significant variables in the upcoming presidential election cycle.

Main Point 1 - Trump's Distrust of Powell: Grounds and Background for Criticism

The direct reason for former President Trump's intense criticism of Chairman Powell lies in the Federal Reserve's interest rate policy. Currently, the Federal Reserve is maintaining the benchmark interest rate at a level of 5.25% to 5.5% and is taking a cautious stance on lowering rates, citing that inflation indicators have not approached the target of 2%. However, Trump argues that rates should be quickly lowered to around 1%, and this difference in policy stance has led to attacks on Powell. Chairman Powell was appointed by President Trump in 2018, but there has been ongoing policy friction between the two throughout his term. At that time, Trump expressed dissatisfaction by calling Powell "reluctant to lower rates," and when the Federal Reserve began implementing ultra-low interest rate policies in response to the COVID-19 pandemic in 2020, the conflict seemed temporarily resolved. However, as high interest rates resumed in 2022, Trump's discontent began to escalate once again. As Trump gears up for a 2025 presidential campaign, he is emphasizing low-interest policies for economic stimulus, which has become a key part of his electoral strategy. Therefore, Powell's strategy of maintaining high rates is politically burdensome for Trump, as his intention to replace Powell is driven by a desire to support pro-growth policies he advocates.

Main point ② - Candidates for Successor and Early Nomination Possibility

Trump stated in his recent remarks that he is "considering 3 to 4 candidates for the Fed chair," although he did not mention any names. However, various media and political circles are discussing potential candidates. The most prominent figure is Christopher Waller, a member of the Fed Board. Waller is relatively classified as a dove within the Fed and is more flexible regarding rate cuts. He is viewed as a representative candidate who aligns with the low-interest-rate environment that Trump may prefer. Another strong candidate is Kevin Hassett, the former Chairman of the White House Council of Economic Advisers. He played a key role in designing economic policies during the Trump administration and has supported tax cuts, deregulation, and economic expansion through low-interest rates. He is regarded as someone who best understands Trump's economic philosophy, making him a potential successor. Additionally, Scott Bessent, the former Treasury Secretary, and Kevin Warsh, a former Fed governor, are also among the candidates. Warsh, in particular, is assessed as someone who has both credibility and experience in the market and was involved in Fed policy during the George W. Bush administration. Although David Malpass, the former World Bank president, has also been mentioned in some reports, his likelihood is relatively low. Trump indicated that he would "appoint a new person immediately" if Powell resigns, suggesting that the official nomination announcement could come around autumn (October to November). This early nomination movement is being met with sensitivity in the political arena, while the White House has distanced itself by stating that "the nomination timing is not imminent."

Main Section ③ - The Fed's Response and the Impact on Financial Markets

The Federal Reserve is still maintaining a cautious stance regarding monetary policy. According to the inflation data released in June 2025, the core inflation in the United States has shown a slight upward trend at around 2.7%, and the labor market continues to show strong recovery. Therefore, the Federal Reserve has stated that it will keep interest rates steady for the time being, reviewing the economic indicators to be released after the summer before deciding on any rate cuts. Neel Kashkari, the president of the Minneapolis Fed, recently stated that "there is a possibility of a rate cut in September," but also emphasized, "I will recheck the data and monitor the situation." This highlights the Fed's intention to base its policy decisions on economic indicators rather than political pressure. Meanwhile, the financial markets are reacting sensitively to Trump's remarks and related reports. As expectations for interest rate cuts spread, U.S. Treasury yields have fallen, and the value of the dollar has been weakening daily. As of the first half of 2025, the dollar index has dropped by nearly 10%, diminishing its relative value against major currencies such as the euro and the Swiss franc. This dollar weakness is affecting the flow of global capital, import and export trade, and energy prices, increasing uncertainty across the global financial markets. Additionally, the risks posed by U.S. politics and the issue of the Fed's successor were key agenda items at the monetary policy forum in Sintra, Portugal, hosted by the European Central Bank (ECB). Central bank officials from Europe and Asia have also expressed concerns about the potential politicization of the Federal Reserve, stating that it could influence their own policy decisions.

Conclusion - A Test of Federal Reserve Independence and Future Outlook

Trump's recent remarks go beyond mere political rhetoric or criticism, raising fundamental questions about the independence of the Federal Reserve and the neutrality of U.S. monetary policy. Since its establishment in the early 20th century, the Federal Reserve has maintained political independence as a principle, implementing monetary policy that provides trust to markets and citizens. However, the situation where a presidential candidate publicly criticizes the chair and implies potential successor nominations poses a threat that could undermine these principles. If Trump were to be elected as the next president, there is a high likelihood that he would appoint someone with a proactive stance on interest rate cuts as the head of the Federal Reserve, which could represent a turning point that significantly alters the framework of U.S. macroeconomic policy in the medium to long term. Conversely, if the current administration preserves the independence of the Federal Reserve and guarantees Powell's term, the boundary of authority between politics and the central bank could be reestablished. Two key variables will be crucial moving forward. First, the inflation and employment trends in the U.S. lasting until the second half of 2025. If conditions allow the Federal Reserve to actually pursue interest rate cuts, Trump's criticisms could be resolved as a temporary controversy. Second, Trump's political moves and approval ratings will matter. If he wins the presidential election, there is a high probability that the management of the Federal Reserve will undergo structural changes. In this context, the current situation can be viewed not merely as a personnel change issue but as a significant crossroads that could impact the independence and predictability of U.S. financial policy, and furthermore, the stability of the global monetary system.