WASHINGTON— President Trump’s escalating clash with Federal Reserve Chair Jerome Powell took a new turn this past week, as the Justice Department moved to close its criminal probe of Powell even as Trump has continued to pressure him to leave the Fed entirely—keeping markets and Washington focused on the central bank’s independence and the increasingly messy transition at the top of the Fed.
Reuters reported Trump said on April 15 he would fire Powell from his separate seat on the Fed’s Board of Governors if Powell does not step down after his term as chair ends May 15. Powell has said that if Trump’s nominee, Kevin Warsh, is not confirmed by then, he would serve as “pro tem” chair of the Board because “that is what the law calls for.”
That fight appeared to ease slightly late this week after Reuters reported the Justice Department dropped its investigation into Powell, a move that helped push the dollar lower as investors saw it as removing one of the biggest immediate risks hanging over the Fed transition and potentially clearing the path for Warsh’s confirmation.
Still, the broader Trump-Powell battle is far from over. Reuters reported Warsh told senators this past week he made no promises to Trump on rate cuts, while analysts said the President’s threats against Powell and the political drama around the Fed risk prolonging uncertainty over monetary policy leadership at a moment when markets remain highly sensitive to inflation, rates and central-bank credibility.