Donald Trump's relationship with Federal Reserve Chair Jerome Powell has been turbulent since Powell's appointment in 2018. Trump has often criticized the Fed's interest rate policies, particularly when they didn't align with his desire for lower rates to stimulate the economy. Now, in 2026, as Powell's term nears its end in May, Trump appears to be intensifying his efforts to influence the central bank, potentially to ensure a successor is appointed who is more aligned with his economic views.
One of the most significant actions taken by the Trump administration is the Justice Department's investigation into Powell. Powell stated that the DOJ served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to his testimony before the Senate Banking Committee in June regarding renovations to the Fed's headquarters. Trump has criticized the $2.5 billion renovation project as excessive. Powell has characterized the threat of criminal charges as a "pretext" to undermine the Fed's independence in setting interest rates. He asserted that the investigation is about whether the Fed can continue to base interest rates on economic evidence rather than political pressure.
Trump, however, has denied any knowledge of the Justice Department's investigation. He told NBC News, "I don't know anything about it, but he's certainly not very good at the Fed, and he's not very good at building buildings". He also claimed that the public is pressuring Powell because rates are too high.
The independence of the Federal Reserve is considered a cornerstone of robust economic policy. It is meant to insulate monetary policymakers from short-term political considerations, allowing them to focus on long-term price stability. Critics view Trump's actions as an attempt to exert undue influence over the Fed, potentially undermining its ability to make decisions based solely on economic data.
Adding to the pressure, Trump is expected to announce his nominee to replace Powell by the end of January. Treasury Secretary Scott Bessent is expected to recommend a nominee to Trump before the holidays. Kevin Hassett, Chairman of the National Economic Council and a long-time Trump advisor, is considered a frontrunner. Other potential candidates include Fed officials Christopher Waller and Michelle Bowman, former Fed governor Kevin Warsh. Senator Thom Tillis has stated he will oppose any Trump nominees to the Fed until the legal matter is resolved.
Despite the ongoing conflict, Powell has stated that he intends to complete his term as chair, which ends in May 2026. Even after his term as chair concludes, he could remain as a Fed governor until 2028.
