As many economists know, Fed Chairman Jerome Powell and US President Donald J. Trump don’t see eye to eye on practically everything. The political “indifference” is no less evident; Trump was asked if he would ask Powell to step down, and he replied, “No, I wouldn’t.”
President Trump is preparing to take office. However, his commitment to mainstream cryptocurrency adoption and deep spending cuts is at odds with Powell’s more dovish, inflation-focused approach.
This escalating tension has been brewing since the election, with speculation mounting about how Trump’s policy priorities would be set: lower taxes, stricter immigration controls, higher tariffs, and a push for digital asset integration would align with the Fed’s mission of price stability.
Powell's latest comments following the FOMC meeting on the central bank's readiness for an uncertain political environment.
Powell's Hidden Position on Cryptocurrencies and Interest Rates
At its FOMC meeting, the Fed cut interest rates by 25 basis points, as expected. However, the move was overshadowed by the central bank’s changing outlook. The summary of economic projections now sees the rate at 3.9% by the end of next year, suggesting two more rate cuts. Inflation expectations for 2025 have risen to 2.5%, while uncertainty surrounding the inflation outlook has increased, with a wider range of possible outcomes.
Jerome Powell, Fed Turns to Trump – New Administration, New Life, New Tone
Powell approached the outlook cautiously, attributing some of the uncertainty to the impact of Trump’s potential tariffs and other economic policies. “We don’t know when we’re going to face that question,” Powell said, emphasizing the Fed’s focus on studying how tariffs could lead to inflation.
While Powell’s comments appear measured, critics allege they betray political bias. By incorporating speculative estimates of Trump’s economic agenda into their forecasts, the Fed may have overstepped its neutral role, a criticism that Trump and his camp have been happy to exploit.
In a press conference yesterday, he dismissed the idea outright, saying, “We are not allowed to own Bitcoin,” while reiterating that any legal changes to allow such a reserve would require congressional approval. The comments sparked a pullback in Bitcoin, which had surged after the election amid optimism about Trump’s crypto-friendly agenda.
Powell’s skepticism reflects the Fed’s broader caution toward digital assets, and we all know Trump doesn’t share that sentiment. The chairman has consistently opposed the idea of federal intervention in cryptocurrencies, casting it as a matter best left to Congress.
This cautious stance puts Powell at odds with Trump, who sees cryptocurrencies as a tool for innovation and economic growth. It remains to be seen whether this split could further strain the relationship between the White House and the central bank.
Make no mistake about it: Bitcoin has been around for over a decade, and if he didn’t support it before, Federal Reserve Chairman Jerome Powell would never support cryptocurrencies.
Trump's frustration with Fed independence
The conflict isn’t limited to crypto policy. Trump has a long history of criticizing Powell’s leadership, accusing the Fed of being “political” and suggesting that interest rate cuts were timed to benefit the election outcome.
Despite his criticism, Trump has also expressed frustration that Powell's rate cuts were not enough, highlighting his desire for more influence over monetary policy.
“I feel the president should have at least a say in this,” he declared, arguing that his business acumen made him better qualified to guide interest rate decisions than Fed officials. That perspective also underscores Trump’s broader ambition to reshape the central bank’s independence, a move Powell has publicly opposed.
“Inflation tends to be lower in central banks,” Powell said in September, defending the current institutional framework. He stressed the importance of insulating monetary policy from political influence, calling it a “good institutional arrangement” that benefits the public.
Trump’s assertion that the Fed should consult him on interest rate decisions has raised eyebrows across the political spectrum. Critics warn that undermining the Fed’s independence could destabilize financial markets and undermine public confidence in monetary policy.
However, Trump supporters, including Tesla CEO Elon Musk, argue that his push for greater oversight reflects legitimate concerns about a central bank they see as out of touch with Main Street.
The tension between Trump and Powell is simply a battle over who has the power to shape economic policy. Powell insists that the Fed is committed to price stability, even as he draws accusations of political bias. Trump’s more aggressive, interventionist stance, on the other hand, reflects his belief in the need for a radical rethink of monetary policy.
The stakes are high for both men, to be sure. They could go one way or another: constructive dialogue or frank confrontation over what policies are “best for America.”