Donald Trump has claimed that his ongoing feud with Federal Reserve Chair Jerome Powell is about lowering interest rates, but according to one historian who spoke with the Wall Street Journal, his latest attack is more broadly about taking complete "control of the board" at the Fed and directing all of its decisions.
On Sunday, reports emerged that the Department of Justice was launching a criminal probe against Powell over allegations that he misled Congress about the scope of a renovation at the Fed's D.C. offices. However, in an analysis published Monday, WSJ's Greg Ip argued that the investigation "isn’t ultimately about the Fed’s headquarters, or Powell, or even interest rates," but rather about seizing the Fed's authorities and sending a "warning" to the next Fed chair to do as Trump says or face the same treatment.
"In that sense, the investigation is also a message to whoever succeeds Powell, likely either Trump adviser Kevin Hassett or former Fed governor Kevin Warsh. Both claim they will be independent. But if either sets interest rates contrary to Trump’s desires, they can expect the same treatment as Powell. That’s a powerful incentive to stay in line."
Trump has long pushed for Powell, whom he appointed as Fed chair in 2018, to lower interest rates, a move that would spur investments and growth for American businesses, but also risk accelerating inflation. Despite the pressure, Powell has resisted lowering rates as much as Trump would like, citing concerns about inflation. Powell also blamed Trump's tariffs for recent surges in inflation, a notion that Trump has pushed back against vigorously, putting the two men even more at odds.
Mark Spindel, a Fed historian, told the WSJ that Trump's plan for the Fed runs much deeper than just slashing interest rates.
“Trump wants not just lower rates, but control of the board,” Spindel explained. “[Treasury Secretary Scott] Bessent and Trump want their hands on the institution."
Despite Trump's desire to oust Powell early and install a loyalist Fed chair, the law greatly restricts the ability of presidents to interfere with the position or the Fed's board of governors. Trump can only remove a Fed chair "for cause" in response to some criminal activity or misconduct. As Ip wrote on Monday, this new investigation amounts to an attempt to "engineer a cause" for Powell's removal.