Trump wants a Fed chief open to rate cuts, signaling policy change if Powell resigns

Trump Criticizes Powell Again, Indicates Desire for Replacement

On Friday, President Trump expressed in a media interview that he would be "very happy" if Federal Reserve Chairman Powell chose to resign. He made it clear that he would appoint someone "who wants to lower interest rates" as the next Fed Chairman. Trump fiercely criticized Powell, calling him a "stubborn mule and a fool," and denounced his monetary policy stance as too rigid.

Trump emphasized that he would never appoint someone who wants to maintain current interest rates; instead, he would choose a candidate who supports further rate cuts. He stated, "I have many choices, and I will select someone who wants to lower interest rates." Trump also claimed he would soon announce a successor, but it should be noted that Powell has 11 months left in his term.

Early Successor Announcement Sparks Market Concerns

Historically, U.S. presidents typically appoint a new Fed Chair only in the final months of the current chair's term. However, according to foreign media reports, Trump is considering announcing Powell's successor as early as September, October, or possibly this summer, much earlier than usual. This move has raised concerns about a "shadow Fed Chair" potentially interfering with current policy.

Columbia Law School professor Kathryn Judge noted that Trump's actions might aim to appoint a loyal candidate who will cooperate with rate cuts, but "the consequences are unpredictable, and we don't know what such a person would choose to do. This is an unprecedented situation."

Experts Warn of Threats to Fed Independence

Former Federal Reserve Vice Chairman Alan Blinder warned that Trump's actions are "a terrible idea." If a "shadow Fed Chair" emerges, the market will have to deal with two influential monetary policy voices, potentially offering drastically different views, escalating financial market turmoil.

AGF Investments' Chief U.S. Policy Strategist Greg Valliere expressed similar concerns: "If there are two Fed Chairs, it will confuse and annoy the market." He pointed out that if Trump excessively interferes with monetary policy and dominates the Fed, it will severely damage the Fed’s independence and negatively impact U.S. financial markets.

Fed Independence Faces Major Test

Since taking office, Trump has consistently pressured the Fed, frequently criticizing its rate hikes or decisions to maintain high rates, and has demanded rapid rate cuts to stimulate the economy and stock performance. His recent statement about being "ready to act quickly" shows he sees Powell's departure as an opportunity to accelerate easing monetary policies.

Trump remarked, "Yes, I am aware of the three or four people I need to choose from. Luckily, Powell's term will end soon, and I think he's terrible." These remarks highlight his intent to influence the Fed's future policy direction by announcing a successor early, with widespread concerns that this move could undermine the Fed's reputation and stability as an independent institution.

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