Will President Donald Trump soon fire Federal Reserve Chairman Jerome Powell, as is now hotly rumored? And do you care? If not, maybe you should. Because at this moment, the Fed chief seems to think he has to re-fight the inflation battle he lost three years ago. And his refusal to cut rates is starting to choke our economy.

Make no mistake: Having lost the confidence of the president who appointed him, Powell should resign. As a matter of practical stewardship of the nation’s central bank, Powell’s effectiveness as a financial leader has been called into question. Time to go.

But Powell’s defenders bizarrely argue that Fed chairmen can’t be fired. In fact, they can be fired “for cause,” which is vague enough to cover a whole host of sins, major and minor.

His backers also argue that Fed chiefs have independence, and that Trump letting him go would shatter that.

But that’s also not true.

As John Tamny, RealClearMarkets editor, economist and author of books on the Fed, recently noted: “Fed officials are appointed by politicians. To presume that they didn’t politic to be in that position in the first place … is laughable.”

At issue currently is whether a politicized Fed has now become hostile to the admittedly mercurial Trump, who feels the Fed’s tight interest-rate policy is holding the economy back.

It is. Take one very important sector, which desperately needs lower interest rates: housing. Annual sales rates for existing homes fell to 3.67 million in May of this year, only slightly above the 3.45 million level at the depths of the financial crisis in 2010.

Why? With average mortgage rates at about 6.83%, buyers can’t afford payments. But as a Morgan Stanley survey in March noted, “91% of people considering buying a home in the next six months would be likely to do so if mortgage rates were to fall to 5.5%. Based on the survey, Millennials and Gen Z are likely to lead the next wave of homebuying.”

Yet, despite a continuing decline in inflation, the Fed won’t cut rates. Funny, when the Democratic Congress and President Joe Biden locked down the economy and spent nearly $6 trillion on COVID, setting off an inflationary spiral, the Fed did little to stop them.

In fact, the Fed began pouring money into an already super-stimulated economy. By doing so, and raising interest rates far too late, the Fed enabled the five-year 25% U.S. inflation surge that decimated real wages for workers, caused U.S. spending and debt to soar, and killed off thousands of businesses.

And we’re still digging out of that mess today.

As we noted above, a Fed chief can be fired for cause. To us, the last five years of Fed incompetence is cause enough. Powell has made too many mistakes, and squandered whatever goodwill he once had with his boss (that’s Trump, the man who appointed him, by the way) and average Americans.

As for Trump “not politicizing” the Fed, please. “Federal Reserve employees donated 92% of their $700k in political contributions to Democrats during the 2024 cycle,” noted our friend economist Stephen Moore of the Committee to Unleash Prosperity. “Does that sound ‘nonpartisan’ to you?”

No, it doesn’t. DEI has hit the Fed hard, just as it has every other major institution in America. The central bank is no different.

“I think what we need is regime change at the Fed,” former Fed governor Kevin Warsh told Maria Bartiromo on Fox’s “Sunday Morning.” “And that’s not just about the chairman, it’s about a whole range of people, it’s about changing their mindset and their models, and frankly it’s about breaking some heads, because the way they’ve been doing business is not working.”

Warsh is on Trump’s short list of possible successors for Powell. As is Kevin Hassett, Trump’s director of the National Economic Council, and Treasury Secretary Scott Bessent. They’re all highly qualified.

“The Fed is in need of perestroika,” writes economist Larry Kudlow, a top Trump economic adviser during his first term in office. “The Fed has to be cleansed of its Deep State dislike of all things Donald Trump, and frankly its Deep State bureaucratic groupthink of deadwood economists with models that haven’t worked in 50 years — who are now advising Chairman Jay Powell to fight Mr. Trump and his economic growth agenda.”

Why bring this up? This week, The New York Times reported that “The president waved a copy of a draft letter firing Jerome H. Powell at a meeting in the Oval Office with House Republicans.”

Responding, Trump says he’s “not planning” to fire Powell now, but doesn’t say he won’t.

If he does, we won’t shed a tear for Powell, whose latest foible was renovating the Fed building into a financial Taj Mahal at a cool $2.5 billion price tag. That alone is “cause” for firing.

We’ve all been warned that markets will “melt down” if Powell goes, with Deutsche Bank shrieking that “both the currency and the bond market can collapse.”

Maybe so. Maybe not. Markets have a way of confounding the predictions of even the smartest people. But even if true, it would still be better for Powell to go quietly than to bitterly fight to stay where he’s no longer wanted and clearly at odds with an elected president’s policies.

— Written by the I&I Editorial Board

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