New Federal Reserve News Agency: Trump has made it "harder" for the next Federal Reserve Chair

After multiple "attacks" on Powell, is the Federal Reserve likely to suffer a loss of independence?

On Thursday, April 24, Nick Timiraos, known as the "New Federal Reserve Correspondent," published an article stating that after repeatedly publicly criticizing Federal Reserve Chairman Powell, although Trump "changed his tune" and expressed no intention to fire him, his strong interventionist stance may undermine investor confidence in the next Federal Reserve chairman.

The article further points out that the market's concern is that even if Trump spares Powell, the damage has been done; regardless of who the next chairman is, the independence of the Federal Reserve will be in doubt, thereby weakening the effectiveness of future monetary policy.

Why is the independence of the Federal Reserve so important?

The article states that since the 1980s, when the Federal Reserve successfully tamed high inflation, its independence from the White House has been regarded as a "ballast."

Why? Because an independently operating central bank is generally perceived as making interest rate policies that are more objective, more professional, and thus more effective.

In simple terms, if the market believes that the Federal Reserve's decisions are based on economic data and long-term goals rather than short-term political considerations, then these decisions are more likely to guide market expectations and stabilize the economy.

Conversely, if the Federal Reserve chairman behaves like a subordinate who is always waiting for presidential orders, then each interest rate adjustment may be interpreted as a political maneuver, leading to chaotic and unpredictable market reactions.

The article states that it is precisely this understanding that has led most U.S. presidents since President Clinton to adopt a stance of "non-interference" in the specific operations of the Federal Reserve, as they understand that cornering the central bank may ultimately backfire and make it harder to achieve economic goals.

Trump raises market concerns about a "shadow chairman"

However, Trump has broken this "tacit agreement."

In April 2025, Trump publicly criticized Powell again, demanding an immediate interest rate cut. Although he later stated that he had "no intention" of firing Powell—this may have been a "cover-up" after the market reacted negatively—this erratic pressure has already caused harm.

The article mentions that the core concern of the market is that this public belittling and pressure will leave an indelible "original sin" for Powell's successor.

The article cites the views of John Silvia, president of Dynamic Economic Strategy consulting and former chief economist of the Senate Banking Committee:

"You can't disparage someone like this and then expect the market to believe that the successor you choose will have remarkable credibility."

Economists David Wilcox from Bloomberg Economics and the Peterson Institute for International Economics also believe that Trump's "threatening posture" towards the Federal Reserve cannot be ignored, "definitely leaving a shadow of suspicion for the next chairman."

This concern is not unfounded.

For example, the article points out that in February of this year, Federal Reserve Governor Michael Barr resigned from his position as Vice Chairman of Bank Supervision after Trump administration officials threatened to fire him. Subsequently, Trump nominated Michelle Bowman, whom he appointed as a Federal Reserve governor in 2018, to take over this position The article states that, in the eyes of financial market participants, there is an "overwhelming possibility" that the next chairman, in order to gain the nomination, "has likely given sufficient reason for Trump to believe he will be satisfied with the new monetary policy," distinguishing it from the Powell era that left Trump dissatisfied.

If the market generally thinks this way, it poses a significant problem.

Timiraos further points out that the speeches of the Federal Reserve chairman and their judgments on the economic outlook are aimed at guiding market expectations. Once the market believes there is a "boss" behind the Federal Reserve issuing orders, the president's remarks may directly influence interest rate trends, which undoubtedly undermines the Federal Reserve's own decision-making authority.

It is not easy for the president to "control" the Federal Reserve

However, to "reshape" the power of the Federal Reserve, Trump still faces multiple constraints.

First, historically, presidential interventions in the Federal Reserve have often yielded unsatisfactory results.

The article mentions that during President Nixon's administration, he privately pressured then-Federal Reserve Chairman Arthur Burns to loosen monetary policy before the 1972 election. Burns complied, resulting in the U.S. economy being mired in high inflation throughout the 1970s.

Secondly, the article also points out that the Federal Reserve is not a monolithic entity, and there are checks and balances within the system itself.

According to existing regulations, the power of the Federal Reserve chairman largely depends on whether he/she can build consensus within the Federal Open Market Committee (FOMC), which consists of 12 regional Federal Reserve presidents and 6 governors. During interest rate decisions, the chairman only has one vote and cannot ensure that every member votes according to his/her intentions.

Jason Furman, a former senior economic advisor in the Obama administration, analyzes:

"What Trump can do regarding the Federal Reserve chairman he appointed is limited. The more extreme the person he chooses, the harder it is to gain the FOMC's approval."

"Unless the president has the authority to dismiss Federal Reserve governors, this system has built-in strong checks and balances... The committee will not comply with a chairman who is purely a political figure."

Who will succeed the chairmanship? What will happen to independence?

The article also mentions potential candidates to succeed Powell, including former Bush administration advisor and former Federal Reserve governor Kevin Warsh, as well as former director of the White House National Economic Council Kevin Hassett.

Interestingly, Warsh stated in a speech in 2010 that he believes "any attempt to improperly influence Federal Reserve policy will be met with strong backlash from Federal Reserve officials and market participants," and claimed that "the only reputation a central bank president should pursue exists in history books."

So, how will the next Federal Reserve chairman respond to this situation? Can they withstand the pressure and maintain the independence of the central bank?

The article points out that current Federal Reserve governor Waller emphasized in an interview that the key lies with the next chairman.

"The key is whether the next chairman will uphold the tradition of the Federal Reserve's independence and formulate policies in a non-political manner... regardless of who the next person is."

Waller also stated that Trump's criticism will not affect how officials work:

"If you don't like being criticized, then don't take this job."