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Donald Trump and Federal Reserve Chair Jay Powell could be on a collision course in 2025.
At a Jan. 7 press conference, Trump said "inflation is still raging, and interest rates are far too high."
Meanwhile, last month, Powell and his colleagues at the Fed lowered forecasts for additional rate cuts this year from four to two.
Read more: What the Fed rate cut means for bank accounts, CDs, loans, and credit cards
At least one Fed official suggested there is no need for further rate cuts in 2025, and markets are now expecting just one move this year. Some on Wall Street have even floated the potential for rate hikes given the labor and inflation outlook.
Tensions between Trump and Powell are far from new and were on display for much of 2024. On the campaign trail, Trump regularly weighed in with criticisms of Powell, offering that the president should "have a say" in Fed decisions and that Powell has "gotten it wrong a lot."
In 2018 and 2019, Trump lobbed regular critiques at Powell — whom he appointed to the role — as the Fed raised rates and triggered a stock market sell-off that year, at one point likening the Fed chair to "a golfer who can’t putt."
After Trump’s election win in November, Powell himself aggressively rebuffed the possibility of being removed before his term ends in 2026.
"Not permitted under the law," the central bank chair said on Nov. 7 to reporters who asked about his views on any legal authorities Trump might have to fire or demote him.
"No," he said at another point in a press conference on the question of whether he would leave, sounding perturbed.
"I think Trump could potentially fire Powell, but he said he’s not going to do that," said Steve Moore, a longtime adviser to Trump. "But I think you could have a showdown. I wouldn't rule it out because Powell has done a lousy job."
Trump's economic policies, including the potential for a new trade war, could cause more inflation, forcing the Fed to pull back any expected interest rate cuts or even consider rate hikes — a move that would surely risk Trump's wrath.
Trump's cost cutter Elon Musk — who recently said the central bank is "absurdly overstaffed" — could also seek to overhaul the Fed’s workforce.
Yet both Trump and Powell appear to be making an effort to sound more conciliatory. Trump said last month on NBC's Meet the Press that he has no plans to remove Powell before the chair's term ends.
That came just days after Powell said that he hoped for a good relationship with the new Trump White House and Trump’s nomination of Scott Bessent, the man who once suggested in an interview that Trump could appoint a "shadow chair" to undermine Powell’s influence, for Treasury secretary.