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Investors, not the Fed, control the interest rates that matter most to businesses and consumers. They might demand higher returns if the central bank’s independence comes into question.
July 17, 2025, 5:03 a.m. ET
President Trump wants the Federal Reserve to lower interest rates. Firing Jerome H. Powell, the Fed chair, could have precisely the opposite effect, pushing up costs for home buyers, businesses and other borrowers.
Mr. Trump in recent days has intensified his long-running attacks on Mr. Powell, whom he has criticized for holding interest rates at a relatively high level even as inflation has cooled and economic growth has slowed. On Tuesday, the president asked a group of House Republicans whether he should fire Mr. Powell, and showed off a draft of a letter that would do so.
Asked on Wednesday whether he intended to fire Mr. Powell, Mr. Trump said he had no immediate plans for a removal, though he refused to rule it out. If he took such a step, it is unclear whether he would succeed. Mr. Powell has indicated his intention to serve out his term as chair, and many legal experts say the law is on his side.
Even if Mr. Trump did manage to oust Mr. Powell, the move might prove counterproductive. A new chair might be able to persuade enough other Fed officials to lower the short-term interest rates that the central bank directly controls. But the rates that matter to most borrowers are long-term rates, particularly those on 10-year and 30-year federal government bonds, which are the basis for what borrowers pay for mortgages, auto loans and lines of credit for most businesses.
The Fed’s decisions influence those rates, but it is investors, through their buying and selling of government bonds, who set them directly. Firing the Fed chair — and, in so doing, undermining the central bank’s longstanding independence — could send them soaring, economists warn.
“If my sole objective were lowering borrowing costs, this would not be the way I would go about it,” said Glenn Hubbard, a Columbia University economist who served as an adviser to President George W. Bush. “It’s not going to work.”
