Trump’s right: “Powell’s termination cannot come fast enough.”

Op-ed views and opinions expressed are solely those of the author.

President Trump wants to replace Fed Chair Jerome Powell as soon as possible. Unfortunately, we are stuck with Powell until Trump can name a replacement in February 2026. Until then Trump hopes Powell doesn’t make any more disastrous mistakes. And Powell has made at least four.

His first major mistake, which occurred just months after being sworn in as Fed chair in 2018, was when he suddenly raised interest rates for no apparent reason. The four interest rate hikes that year worked against the stimulative effects of the large across the board tax cuts.

The country had been mired in a 2% annual growth rut since 2008. In 2017, the president and Congress decided to stimulate growth. To do so, Congress passed the Trump tax cuts which reduced taxes by 10% for virtually all Americans. The resulting large increase in disposable income should have led to a large increase in GDP.

But as soon as the tax cuts took effect, Powell clamped down on consumer demand by jacking up interest rates. Growth did hit nearly 3% in 2018 despite Powell’s mistake. He realized the mistake and cut interest rates in 2019.

The second major mistake lasted from January 2021 to June 2022. Inflation was starting to rise quickly early in 2021. Not only did Powell offer rather lame excuses like this “inflation is transitory,” but he kept interest rates near zero for the entire 18 months.

Worse yet, he rapidly expanded the money supply by having the Fed purchase almost half of the bonds needed to finance the administration’s massive deficit spending. Powell purchased $120 billion worth of government bonds monthly.

This mistake led to the annual inflation rate rising to over 9%.

The third major mistake occurred in 2023. After waking up in June 2022 and realizing the top priority for monetary policy is price stability, Powell began to aggressively raise interest interests. By July 2023, he had raised the federal funds rate from near zero to over 5.25%.

The mistake was that he paused rate hikes too soon. Had the rates been raised one or two more times, inflation would be a smaller problem today. Instead, his mistake allowed inflation to linger. It remained at 3% well into 2024.

That brings us to mistake #4. The CPI had finally fallen to 2.4% by September 2024. Had the Fed done nothing for the next three months, inflation may have fallen to the 2% target. Yet Powell cut interest rates in September, November and again in December. By January 2025, the CPI increased to 2.9%.

Not since the 1970s when Arthur Burns was the Chair of the Federal Reserve, have we seen such poor monetary policy decisions. Mistake after mistake, coupled with the Biden administrations nearly $8 trillion of deficit spending and Biden’s decision to reduce the supply of energy, has led to this sticky inflation problem.

Today, Powell, in a bizarre statement, says he likes to be ahead of economic problems, so he has decided to hold interest rates constant. That may prove to be his fifth major mistake, especially if the soon to be released GDP numbers for the first quarter, shows less than 1.5% growth.

Inflation has fall to 2.4% from 2.9% in January. Economic growth is slowing, although the jobs numbers are still healthy. Energy prices have fallen this year and will continue to fall as President Trump acts to vastly increase the supply of energy. Powell should consider interest rate cuts.

While the federal government deficit continues to be high, Trump, through DOGE, will reduce government spending and lower the deficit. Reduced government spending and lower energy prices will reduce inflation further, possibly reaching the 2% target by year end.

Powell says he is worried about the inflationary impact of Trump’s tariff policy. And while tariffs do put upward pressure on prices, so far price increases haven’t happened. That’s because Trump’s threatened tariffs have resulted in most countries immediately seeking new trade deals with the US before the tariffs are implemented. Once the deals are signed, the inflationary impact of the new tariff deals will be insignificant.

Eventually Powell will be gone, and the Biden/Powell inflation will be gone. And we will have a new Fed chair who avoids costly mistakes. Until then, we are stuck with Powell.

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