Hassett slams Powell's Fed hold as Trump fills 1 of 7

The White House escalated its attack on the Federal Reserve's independence Thursday, with National Economic Council Director Kevin Hassett accusing former Chair Jerome Powell of preventing President Donald Trump from appointing new board members by staying at the central bank.

"Powell not opting out is a highly unusual situation. It's a very abnormal thing for a former chair to continue sitting in that seat," Hassett said in an interview Thursday. A day earlier, he told Fox Business that a majority of Federal Open Market Committee members vote "because they want to target Trump" rather than for patriotic reasons.

Trump has successfully appointed just one of seven Fed board seats since starting his second term — new Chair Kevin Warsh. Powell's term as a governor runs through January 2028, and he said in April he would leave "when he sees fit." The Fed held its benchmark rate steady at its June meeting, defying Trump's repeated calls for aggressive cuts. The central bank's next rate decision is scheduled for late July.

The confrontation threatens to erode the Fed's political independence, a cornerstone of U.S. monetary policy credibility that has been a bedrock principle in developed economies for decades. The last time a U.S. administration so openly challenged Fed autonomy was in 2019, when Trump criticized Powell's rate-hiking cycle. During that period, the S&P 500 fell about 6 percent over three months as uncertainty mounted, according to market data.

Hassett said Thursday that the situation is ultimately "something that Chair Warsh is going to have to deal with." When asked whether an investigation into Powell was warranted, he responded: "The Fed needs to do its job. They have great leadership, and hopefully everything will work out fine."

The standoff comes as the Fed navigates a complex policy environment. Inflation has moderated from its 2022 peak but remains above the central bank's 2 percent target, limiting the case for rate cuts. The political pressure from the White House adds a layer of uncertainty that could delay or alter the timing of any future easing.

The broader implications extend beyond monetary policy. A perceived politicization of the Fed could raise risk premiums across U.S. assets, push bond yields higher, and weaken the dollar — directly affecting the borrowing costs for households, companies, and the federal government. For investors, the key question is whether the Fed can maintain its credibility through a period of unprecedented political pressure.

The vacancy situation at the Fed board also carries consequences for financial regulation. With six of seven seats filled by Trump appointees or holdovers, the balance of power on regulatory matters — from bank capital requirements to community reinvestment rules — could shift significantly if Powell were to depart. Warsh, a former Fed governor who served from 2006 to 2011, is widely expected to put his own stamp on both monetary policy and supervision.

This article is for informational purposes only and does not constitute investment advice.