Fear of defeat in the midterm elections is pushing Trump to try to control every lever of economic power. So far, financial markets have reacted calmly to the clash between Trump and Powell. But, as Corriere della Sera warns, even the markets’ tolerance has a limit.
The clash between Donald Trump and Federal Reserve Chairman Jerome Powell is entering a delicate phase that could have the opposite effect than the one intended by the White House. According to an analysis by Corriere della Sera, the investigation opened by the US Department of Justice against Powell risks being perceived not as a show of strength, but as a sign of weakness and political myopia on the part of the US president. Although Trump denies that he has directly sought legal action, the move has raised the alarm on a key issue for global economic stability: the independence of the Federal Reserve.
THE MANDATE ENDS, BUT THE ROLE DOESN’T
Jerome Powell’s term as Fed chairman ends on May 15, and a re-election is virtually out of the question. However, Powell remains a member of the Board of Governors until January 2028. That means he could continue to participate in interest rate decisions, along with the heads of regional banks. Such a presence would be politically and institutionally uncomfortable for a new Fed chairman chosen by Trump and potentially more willing to follow the White House’s directives.
FROM POLITICAL PRESSURE TO PERSONAL RESISTANCE
According to the Italian newspaper, it is possible that the investigation into Powell is aimed at pushing him to leave the Fed completely after his term ends. But the result could be the opposite. Powell, described as persistent and formed in a culture of institutional discipline, could decide to stay precisely to defend the independence of the central bank, which he himself has already declared “under attack”. Publicly insulted, politically delegitimized and now involved in a legal battle, Powell has the opportunity to become a long-term obstacle for Trump, even facing a criminal trial that, thanks to his personal wealth built up before joining the Fed, he can afford to pay. Meanwhile, some Republican senators have signaled that they may not support the confirmation of Powell’s successor, further complicating Trump’s strategy.
UNCONVENTIONAL SOLIDARITY FROM WORLD CENTRAL BANKS
Another side effect of Trump’s moves has been the mobilization of the world’s major central banks. The heads of the European Central Bank, the Bank of England, the central banks of Canada and Switzerland, and the Bank for International Settlements, have signed a joint statement in support of Powell. The statement emphasizes that the independence of central banks is a fundamental pillar of price and financial system stability, and that Jerome Powell has performed his duties “with integrity and commitment to the public interest.”
AMERICAN ECONOMY UNDER PRESSURE
According to an analysis by Corriere della Sera, the real reason behind Trump’s pressure on the Fed is related to the real state of the US economy. The president aims to lower interest rates to 1% to stimulate demand, despite the risk of rising inflation, which is also exacerbated by the policy of customs tariffs. Outside the technology sector, US economic growth has been modest, only 1.3% in the last year. Employment is slowing, private investment is falling and consumer confidence is weakening.
In this context, the fear of a defeat in the midterm elections is pushing Trump to try to control every lever of economic power. So far, financial markets have reacted calmly to the clash between Trump and Powell. But, as Corriere della Sera warns, even the markets’ tolerance has a limit. If a blatant abuse of power is perceived that endangers monetary stability, the consequences could be reflected in inflation, the credibility of the Fed and the value of the US dollar.