JP Morgan CEO issues Wall Street's clearest warning: The independence of the Federal Reserve is crucial

On Tuesday, JPMorgan Chase CEO Jamie Dimon publicly warned the Trump administration not to interfere with Federal Reserve Chairman Jerome Powell's work, emphasizing that the independence of the central bank is "crucial."

Dimon stated to the media during a conference call following JPMorgan Chase's earnings report:

I believe the independence of the Federal Reserve is absolutely key. If there are manipulations of the Federal Reserve, it could have counterproductive consequences.

Dimon is the first leader of a major U.S. financial institution to publicly respond to the Trump administration's attacks on the Federal Reserve Chairman. Although many on Wall Street privately worry that political pressure could undermine the credibility of the Federal Reserve, no one had previously spoken out publicly.

Currently, the U.S. is not in a recession, but the Trump administration is still expanding the budget deficit during peacetime, making the independence of the Federal Reserve particularly important in the coming years. Analysts point out that if U.S. policymakers show a higher tolerance for high inflation, it could raise long-term government borrowing costs, thereby putting new pressure on households, businesses, and banks.

For months, Trump has been mocking and criticizing Powell, accusing him of failing to cut interest rates quickly. He has called for the Federal Reserve to lower the benchmark interest rate by as much as 3 percentage points.

White House advisors have also attempted to further pressure Powell by criticizing the Federal Reserve for renovating its historic office building and purchasing an adjacent building that has been vacant for seven years.

Nevertheless, Trump stated to reporters last Friday that he does not intend to remove Powell. Powell's position as Federal Reserve Chairman was appointed during Trump's first presidential term, and his term as chairman will end in May next year.

U.S. Treasury Secretary Scott Bessent stated in a television interview on Tuesday that the Trump administration has initiated the formal process of searching for the next Federal Reserve Chairman and believes that Powell should resign from the Federal Reserve Board after stepping down as chairman.

Bessent described Trump's criticism as merely "pressuring the referee." In sports, head coaches often pressure referees with words to seek favorable calls.

Bessent stated that an independent central bank is crucial for maintaining external confidence in U.S. long-term government bonds. He pointed out in an interview with Bloomberg Television: "This is key to maintaining market trust."

Wall Street almost unanimously believes that interfering with the independence of the Federal Reserve could have significant implications for global capital flows, as it relates to the U.S. Treasury bonds and the dollar that underpin global financial markets.

So far, the market has not shown strong signs of concern that Trump would dismiss Powell before the end of his term. One reason is that investors generally believe such a move would be counterproductive—potentially triggering a sell-off of U.S. Treasuries and rising Treasury yields, which would in turn raise interest rates in the economy, including mortgages, student loans, and corporate bonds.

In April of this year, the market briefly fell due to concerns that Trump might dismiss Powell, but it quickly rebounded after Trump stated he would not do so. Additionally, the Trump administration's repeated delays in implementing tariff plans have led investors to believe that he would not actually take actions that would severely impact the market.

Despite the ongoing pressure from Trump for aggressive interest rate cuts, Powell has maintained the independence of the Federal Reserve, earning praise from Congress, central bank peers, and business leaders. The White House claims that interest rate cuts can lower government borrowing costs, while Federal Reserve officials worry that unnecessary rate cuts could instead raise long-term rates, leading to economic or market instability At a congressional hearing last month, Powell revealed that many members of Congress privately told him, "You're doing the right thing."

Earlier this month, at a meeting hosted by the European Central Bank, Powell calmly responded to questions regarding Trump's criticism, stating that his only focus is on achieving the Fed's "dual mandate"—price stability and full employment. "That's our entire focus, 100%," his remarks earned applause from the audience.

European Central Bank President Lagarde and central bank governors from the UK, South Korea, and Japan also expressed their support for Powell. Lagarde said, "I think we would make exactly the same choice as Mr. Powell."

Analysis points out that considering Dimon's position on Wall Street and his history of influencing Trump's decisions, his public support for the Federal Reserve is particularly significant.

Dimon has always been outspoken; after Trump announced the "Freedom Day" tariff plan that caused market turmoil, he gave an interview in which he directly warned Trump that this move could trigger an economic recession. Trump was watching the program at the time and adopted Dimon's advice