Monetary Policy

Trump: 'We won't fire Powell unless he has to leave for fraud. I think he's under investigation"

This was reported by Bloomberg news agency, citing a White House official, according to whom, however, the president has not yet made a final decision

16 July 2025

Usa, Trump accusa il presidente della Fed Jerome Powell: "Potrebbe essere licenziato"

4' min read

Just like in the reality show that made him even more popular: "You are fired!" Donald Trump is preparing to dust off his famous phrase to torpedo Jerome Powell, the much 'hated' Fed chairman who, in his view, is costing the US hundreds of billions of dollars and for whom a letter of dismissal would already be ready. The indiscretion, bounced around in the American media, was publicly denied by the president. But the sensational change in the leadership of the central bank seems imminent.

The shadow of renovation work

"I am not ruling anything out but it is very unlikely," the president replied to those who asked him about his intention to end the Powell era. But then he quickly clarified: 'Unless he leaves because of fraud. I think he's already under investigation'. The reference is to the controversial refurbishment of the Fed's Washington headquarters, which cost $2.5 billion, far more than expected. A threat then, not even too veiled, with which Trump rides on the accusation that he could become the motivation to remove the central bank president. Section 10 of the Fed's bylaws states that the members of the board of governors, of which the president is a member, may be removed for cause.

"Powell wants a Versailles-style palace," the White House has been repeating for days, increasing the pressure on the Fed's number one, who was appointed by Trump during his first term and has become his worst enemy. The renovation of the Fed was approved in 2017 and work began three years ago. The cost increase, the central bank explains on its website, is due to unforeseen conditions, such as the presence of a significant amount of asbestos and the resulting toxic soil contamination.

Months of accusations against Powell

This is not the first time that Powell has been threatened by Trump. The accusations have been coming for months, so much so that the Fed chairman has already made it clear on several occasions that he will reject any attempt at dismissal by the White House. The president, it is Powell's thesis, does not in fact have the legal authority to torpedo or downgrade those in leadership positions. A tough stance, taken in the name of that independence of the central bank that he wants to defend at all costs, and which hints at a possible violent legal clash in a situation that is virtually unprecedented. For observers it is in fact clear that Trump only wants to remove Powell because of the failure to cut interest rates: fraud is an excuse, even one that is difficult to prove legally.

The Fed's bylaws in fact grant the central bank authority over its buildings, not to mention that the work is not paid for by US taxpayers but directly by the Fed through interest and fees collected by the banks. Trump's words before the Bahraini crown prince were harsh, with Powell described as a 'fool', an 'inept' who is doing a 'terrible job'. Yet - the tycoon claims - the job he holds 'is the easiest one I've ever seen. You just show up once a month and say what the interest rates are at,' he explained, also criticising the Fed board for its failure to act on the cost of money. The central bank is in fact a collegial body, and its chairman does not decide the level of interest rates alone: the decision is made by a majority vote among the 12 members that make up the board.

Meanwhile, the totonomi already rages on. 'Many people want the Fed chairmanship. I get calls begging me,' Trump said again. In pole position for the job, especially if Powell were to be removed before his term expires in May 2026, is White House economic advisor Kevin Hassett, a loyalist of the president. Another option is Treasury Secretary Scott Bessent. 'He's very good, I like the job he's doing,' Trump remarked. It is difficult, however, for the tycoon to opt for his negotiator-in-chief on tariffs at such a crucial time for the definition of trade agreements. Financial markets are following the developments with apprehension. European stock exchanges closed in the red, with Milan losing 0.40 per cent. Wall Street immediately turned negative with the rumours of Powell's dismissal, but then turned upwards with the denial. But caution dominates among investors and the tycoon's unpredictability worries: removing the Fed chairman would mean undermining the credibility of the central bank and the entire American financial system, with consequences - they warn - that are difficult to predict.

Fed: cost pressures will remain high in the coming months

"Traders across a broad range of sectors expect cost pressures to remain elevated in the coming months, increasing the likelihood that consumer prices will begin to rise more rapidly by the end of the summer." So writes the Federal Reserve in its latest July update, the Beige Book.

"Prices increased in all districts, with seven describing price growth as moderate and five describing it as modest, in line with the previous report," it reads. In all twelve districts, companies reported modest to pronounced tariff-related input cost pressures, particularly for raw materials used in manufacturing and construction. Rising insurance costs were another widespread source of price pressure. Many companies passed on at least some of the cost increases to consumers through price increases or surcharges, although some refrained from raising prices due to increasing customer sensitivity to prices, resulting in margin squeezes'.