By now, we know his playbook. To discredit those who oppose him, Donald Trump gives them nicknames. Notable examples include "Sleepy Joe" for Joe Biden, "Rocket Man" for Kim Jong Un, and of course our favorite, "Too Late" for Jerome Powell. It is the label Trump uses to condemn the Fed chair's reluctance to cut interest rates.
Interest rates that the U.S. president deems too high. Nothing surprising there. Politicians always want lower rates to juice growth and, ultimately, their popularity ahead of the next elections. Donald Trump also has a background as a real estate developer, a sector highly sensitive to rates.
But in 2025, the U.S. president did not stop at giving his opinion and criticizing Jerome Powell's inaction. He exerted unprecedented pressure on the Fed, unseen in at least half a century.
"He will leave very quickly, believe me"
It truly began in April. Shortly after rattling markets by imposing reciprocal tariffs on all countries, Donald Trump explicitly threatened to fire Jerome Powell. "I am not happy with him. If I want him to leave, he will leave very quickly, believe me," he declared on April 17 in the Oval Office, alongside Italian Prime Minister Giorgia Meloni.
An attack on the Fed's sacrosanct independence, which then intensified pressure on Treasuries and the dollar. While everyone quickly understood that Donald Trump would not carry out his threat, given the market fallout, he nonetheless kept up the pressure in the weeks that followed.
Trump and his circle used the Fed headquarters renovation to that end, denouncing alleged cost overruns. The affair culminated in a site visit by Trump himself and a surreal scene: an impromptu press conference by the U.S. president and the Fed chair, construction helmets on their heads. "All I expect from him is to cut interest rates," Trump hammered.
Renovation of the Fed headquarters site, July 24, 2025
Refreshing the committee
In reality, the whole point for Donald Trump is to appoint a successor to Jerome Powell who shares his views and is loyal. Recall that he appointed Powell in 2018, a choice he later regretted and blamed heavily on his Treasury Secretary, Steven Mnuchin.
Trump has indicated he should announce his choice in early 2026. But the U.S. president's deadlines are generally fluid. In late November, Kevin Hassett emerged as the frontrunner, but Kevin Warsh (a former Fed governor) and Governor Christopher Waller still seem in the mix after recent interviews with Trump, while Rick Rieder (BlackRock) is due at Mar-a-Lago this week.
Trump is also trying to refresh the FOMC (the monetary policy committee) as much as possible. The committee is made up of 7 governors appointed by the president (with Senate confirmation) and 12 regional Fed presidents. Each of these banks has a board of directors that appoints its president for 5 years, appointments that must then be approved by the Fed governors.
This year, the Trump administration appeared to seek greater control over these appointments. Treasury Secretary Scott Bessent also faulted regional Fed presidents for not being from the districts they oversee. But the governors ultimately voted unanimously earlier this month to renew all regional Fed presidents (with the exception of Raphael Bostic of the Atlanta Fed, who is retiring).
On the governors' side, the surprise resignation of Adriana Kugler in August gave Trump an opening. He installed his adviser Stephen Miran, who also kept his White House post. His term ends in January, and Trump will likely name, in his place, the person who will succeed Jerome Powell.
The Supreme Court as arbiter
The other governor in the spotlight this year is Lisa Cook. Accused by the Trump administration of mortgage-loan fraud, she was fired by the U.S. president in late August. But the decision was blocked by a federal judge in early September, allowing her to keep her post. A hearing is now scheduled at the Supreme Court on January 21.
This decision will be pivotal for the Fed's future and its independence. Under the Federal Reserve Act, the president can remove a Fed governor only for "cause." However, there is no case law on the matter, as there is no precedent for a president firing a governor.
But looking back at the September ruling, there does not appear to be cause here. First, because the allegations against Lisa Cook are unrelated to her official duties and second, because they concern a period prior to her appointment to the Fed. If the Supreme Court rules in favor of the Trump administration, it would be a turning point, as it would give the president near carte blanche to replace Fed governors.
One chair, one vote
Finally, the future of the current Fed chair remains quite uncertain. While his chair term ends on May 15, his governor term does not expire until January 2028. Asked several times, he has so far declined to say whether he would stay beyond May.
What is interesting here is that, over the course of this year, there was considerable discussion about the possibility of a "shadow Fed chair." In other words, the idea that Donald Trump could name Jerome Powell's successor well before the end of his term and that the latter could already guide market expectations.
But in the end, that role could well be filled by Powell himself (if he remains after May). He has real legitimacy inside the Fed and has been building consensus for eight years now. It is entirely plausible that he continues to keep everyone on "reasonable" positions in the face of a chair close to Trump who would want to cut more aggressively.
This is only a hypothesis, since such a setup would also put Powell in the crosshairs. But behind these conjectures lies a problem the next Fed chair will not escape: he will have to build consensus and bring all colleagues in the same direction. "The chair of the Federal Reserve has the ability to set the discussion in motion, but in the end, he has only one vote," summarizes Treasury Secretary Scott Bessent.
"What do you do?"
The committee is currently very divided. The last meeting showed it. While the Fed cut rates by 25 basis points, several members expressed disagreement. Austan Goolsbee, the Chicago Fed president, and Jeffrey Schmid, the Kansas City Fed president, voted to hold. Stephen Miran again opted for a half-point cut.
It was the first time since 2019 that there were three dissents. And in reality, even more members would have preferred a hold. The dots plots show that six FOMC members would have preferred higher rates at year-end.
The Fed is facing an exceptionally difficult environment. There are risks on both sides of its mandate: a slowing labor market and inflation that is too high. And the 43-day shutdown severely disrupted data releases, making it harder to read the state of the U.S. economy.
"A significant number of participants agree that the risks are to the upside on unemployment and to the upside on inflation. So what do you do? You have only one tool that cannot do two things at once," Jerome Powell summarized at his December 10 press conference.
Since that meeting, an employment report has shown a rise in the jobless rate to 4.6% - above the level projected by the Fed for year-end - while job creation is holding up. At the same time, November inflation surprised to the downside. But that figure is more the result of data collection heavily disrupted by the shutdown than a sign of a genuine disinflation trend.
More broadly, all these delayed data are probably of limited value, and it will take time for a clearer picture to emerge. While markets are pricing two additional rate cuts in 2026, everything will depend on the data but also on the Fed's reaction function, that is, the balance between both sides of its mandate. A balance that a chair appointed by Donald Trump could shift.
Find all the articles in the "2025 as seen by MarketScreener" series:
