Donald Trump: Resignation from Fed board as an opportunity against Jerome Powell

With the appointment of a new board member at the US Federal Reserve, PresidentDonald Trump (79) has the opportunity to influence its future course in his favor. While he has so far refrained from removing Fed Chairman Jerome Powell (72) due to impending market turmoil, Trump said in an interview. However, he told reporters that he was "very happy" about the surprise resignation of board member Adriana Kugler , because it would open a seat on the central bank's governing board. The board sets the key key interest rate, which can indirectly promote economic growth.

Trump has long been vehemently demanding a significant interest rate cut to lower borrowing costs and stimulate consumption and investment. If this boosts the US economy, it generally has a positive impact on the president's approval ratings. However, given the existing inflation risks resulting from Trump's radical tariff policy, the Fed is pursuing a prudent monetary policy and is hesitant about interest rate cuts.

Trump blames Powell personally for the fact that the interest rate cut he hoped for has not yet materialized. At the Federal Reserve Board's latest decision on Wednesday, however, it was noticeable that – unlike previously – not all members supported maintaining the key interest rate in the range between 4.25 and 4.5 percent. Two of the eleven representatives present – Michelle Bowman and Christopher Waller – advocated for a cut. Waller is said to be politically close to Trump and, along with Treasury Secretary Scott Bessent, is being considered a possible successor to Powell.

Dissenting voices are rare on the Federal Reserve Board. It seems conceivable that other members could fall in line with the US president's pressure during the next decision. The dissenting voices would "ONLY GET STRONGER," Trump wrote on his Truth Social platform.

Kugler's unexpected resignation, effective August 8th, announced Friday afternoon (local time), represents an opportunity for him in this regard. The president nominates the board members—who must be confirmed by the Senate—who, in turn, make up the majority of the powerful Federal Reserve Board. Thus, the president can exert indirect influence in the White House through the selection of loyal followers. Kugler's term of office would not have expired until January 2026.

The Republican again called Fed Chairman Powell, whom Trump has publicly insulted and called for his resignation for months, a "stubborn FOOL." Kugler, he claimed, knew Powell had done the wrong thing with regard to the interest rate. "He should resign too!" At the same time, the president demanded that the Fed board "TAKE CONTROL" if the central bank chairman continued to refuse to lower the key interest rate "significantly."

Because Trump hasn't gotten what he demands so far, he has repeatedly threatened to fire Powell. However, the legal hurdles for such a move are high. Whether a US president can even remove the head of the Federal Reserve has not been conclusively determined. Powell's term ends next May.

When asked by a host of the ultra-conservative US channel Newsmax why he didn't fire Powell, Trump said: "I'd fire him in a heartbeat, but they say that would scare the market." He added that the Fed chief was leaving office in a few months anyway. Asked again whether Powell would retain his post for the time being, Trump stated that it was "highly likely."

According to recent Fed data, US growth slowed in the first half of the year, while uncertainty about the economic outlook remains high. The former could signal that the Fed will indeed cut interest rates in September for the first time since December 2024.

The key interest rate determines the rate at which banks can borrow money from the central bank. Moreover, low interest rates make it easier for governments to borrow: According to an estimate by the U.S. Congressional Budget Office, Trump's new tax law will increase the deficit by around $3.3 trillion (about €2.8 trillion) over the next ten years.