Trump Threatens Legal Action Against Powell Over Fed Spending and Rate Policy

Trump has intensified his public battle with Federal Reserve Chair Jerome Powell, escalating from criticism to an explicit threat of legal action. In a post on Truth Social on August 12, 2025, the accused Powell of mismanaging a multi-billion-dollar renovation project at the Federal Reserve, which Trump claimed had ballooned from an initial budget of $50 million to $3 billion [2]. He also criticized Powell for delaying interest rate cuts, arguing that such inaction is harming the economy by keeping borrowing costs high and stifling employment [2].

The president’s criticisms are part of a long-standing tension with the Fed, dating back to Powell’s appointment in 2017. Trump has consistently called for more aggressive rate cuts to support economic growth and criticized Powell for what he views as an overly cautious approach [2]. His recent comments include a dramatic ultimatum: Powell must either cut interest rates by 300 basis points or resign by May [2]. This rhetoric reflects a broader push to influence the Fed’s policy direction, despite the institution’s independence from direct political control.

While Trump has previously suggested firing Powell, legal experts have emphasized that such an action would face significant constitutional and procedural challenges. The Fed chair is appointed for a four-year term and cannot be removed without due process [4]. Trump’s current legal threats add a new dimension to the conflict, raising questions about the implications for the Fed’s autonomy and public trust in its decision-making.

The potential fallout extends beyond policy debates. Trump’s statements have already impacted financial markets, with Bitcoin dropping below $119,000 following his public remarks [2]. Analysts have warned that political interference in monetary policy risks politicizing the Federal Reserve and could trigger volatility in both traditional and cryptocurrency markets. The president’s focus on financial mismanagement also brings scrutiny to the Fed’s administrative decisions, potentially leading to legal and public inquiries into its spending practices.

Trump’s demands for immediate rate cuts align with arguments that lower borrowing costs could boost economic growth. However, the Fed’s current stance, supported by five of its members, favors maintaining rates to monitor inflationary trends. This divergence highlights a fundamental disagreement over economic strategy between the and the central bank.

As the situation evolves, the outcome of this public clash could influence not only monetary policy but also the broader political landscape. The Federal Reserve now faces the challenge of balancing its policy goals with the heightened pressure from a prominent political figure. Whether it will respond to Trump’s demands or resist further political pressure remains uncertain, with implications for both the economy and the institution’s credibility.

Sources:

[2] https://coindoo.com/trump-threatens-major-lawsuit-against-fed-chair-powell/

[4] https://insurancenewsnet.com/oarticle/comment-despite-trumps-threats-he-knows-he-cant-fire-powell

[5] https://www.aol.com/news/explainer-could-trump-legally-fire-171215667.html