Resignation from the Fed board: Trump senses his chance

Trump has long been vehemently calling for the interest rate to be lowered significantly in order to reduce borrowing costs and stimulate consumption and investment. If this boosts the US economy, it usually has a positive effect on the president's approval ratings. However, given the existing inflation risks as a result of Trump's radical tariff policy, the Fed is relying on a cautious monetary policy and is hesitant to cut interest rates.

Dissent in the central bank council gives Trump hope

Trump blames Powell personally for the fact that the interest rate cut he had hoped for has not yet come about. However, it was noticeable at the most recent decision of the Federal Reserve Council on Wednesday that - unlike before - not all members were in favor of keeping the key interest rate in the range between 4.25 and 4.5 percent. Two of the eleven representatives present - Michelle Bowman and Christopher Waller - argued for a reduction. Waller is said to be politically close to Trump and, alongside Treasury Secretary Scott Bessent, is considered a possible successor to Powell.

Dissenting voices are rare in the central bank council. It seems conceivable that, under pressure from the US President, other members could toe his line in the next decision. The dissenting voices would "ONLY GET STRONGER", Trump wrote on his Truth Social platform.

Kugler's unexpected resignation on August 8, which was announced on Friday afternoon (local time), is an opportunity for him in this respect. This is because the President nominates the members of the Board of Directors - to be confirmed by the Senate - who in turn make up the majority of the powerful Central Bank Council. The head of the White House can therefore exert indirect influence by selecting loyal followers. Kugler's term of office would not have expired until January 2026.

Trump: Board should take control away from Fed chief

The Republican once again referred to Fed Chairman Powell, whom Trump has been publicly slandering and calling for his resignation for months, as a "stubborn STUPID HEAD". Kugler had known that Powell had done the wrong thing with regard to the interest rate, Trump claimed. "He should resign too!" At the same time, the President demanded that the Fed Board should "TAKE CONTROL" if the Fed Chairman continues to refuse to lower the key interest rate "significantly".

Because Trump has so far not gotten what he wants, he has threatened to fire Powell several times. However, the legal hurdles for such a move are high. Whether a US president can dismiss the head of the Federal Reserve at all has not been conclusively clarified in legal terms. Powell's term of office ends next May.

"I would remove him in a heartbeat"

When asked by a presenter on the ultra-conservative US channel Newsmax why he was not firing Powell, Trump said: "I would fire him in a heartbeat, but they say that would upset the market". In addition, the head of the Federal Reserve would be leaving office in a few months anyway. When asked again whether Powell would keep his post for the time being, Trump stated that this was "very likely".

According to the latest data from the Fed, growth in the US slowed in the first half of the year, while uncertainty about the economic outlook remains high. The former could be a sign that the Fed will indeed cut the key interest rate again in September for the first time since December 2024.

The key interest rate determines the rate at which banks can borrow money from the central bank. Governments also find it easier to borrow when interest rates are low: According to an estimate by the US Congressional Budget Office, Trump's new tax law will increase the deficit by around 3.3 trillion US dollars (around 2.8 trillion euros) over the next ten years.