Trump Threatens Powell with Lawsuit Amid Interest Rate Clash—Here’s Why It Matters

Former President Trump escalates his feud with Fed Chair Jerome Powell, linking a potential lawsuit to their ongoing battle over interest rates. The move signals a high-stakes power play as markets brace for volatility.

Why now? With inflation still simmering and the 2024 election looming, Trump's threat isn't just legal theater—it's economic warfare. The Fed's next rate decision could spark fireworks.

Bonus jab: Nothing unites politicians like blaming central bankers for the consequences of their own policies. Powell's printer may go brrr, but the blame game runs faster.

Trump ties lawsuit threat to interest rate fight

The lawsuit threat is the latest move in Trump’s long-running campaign to pressure Powell into cutting rates. “Jerome ‘Too Late’ Powell must NOW lower the rate,” TRUMP posted, adding that lowering rates by several points would save the U.S. large amounts of money and ease upcoming debt obligations.

The Federal Reserve has refused to change its stance on rates this year. Rates have stayed steady throughout 2025, following multiple cuts in 2024, the final year of Joe Biden’s presidency. In testimony before Congress in July, Powell said the Fed would have already eased policy this year if not for Trump’s tariff policies, which he argued were influencing economic conditions.

Trump has been pressing Powell since the start of the year, insisting that rate cuts are overdue. His frustrations spilled into public view last month during a visit to the Fed’s construction site.

Trump told Powell that the renovation cost had reached $3.1 billion, a figure Powell disputed on the spot, saying, “I haven’t heard that from anybody.” The Fed has defended the work, citing the need to modernize and preserve the historic buildings, and explained that costs have risen due to construction challenges and preservation rules.

Trump’s criticism of the renovation is now central to his attacks on Powell, framing it as an example of government waste. He wrote on Truth Social that the handling of the project was “horrible” and “grossly incompetent,” calling the price tag “not good” for what he insists should have been a far smaller job.

Administration expands search for Powell’s replacement

Meanwhile, the Trump administration is quietly building a shortlist of potential replacements for Powell when his term ends next year.

The list now includes Fed Vice Chairs Philip Jefferson and Michelle Bowman, Dallas Fed President Lorie Logan, former St. Louis Fed President Jim Bullard, and macroeconomic consultant Marc Sumerlin. An administration official allegedly confirmed to Politico that more names from the private sector are being considered.

These additions add to an earlier set of candidates, which had National Economic Council Director Kevin Hassett, former Fed board member Kevin Warsh, and current board member Christopher Waller.

According to Politico, Trump’s got with a diverse mix of choices, from internal Fed leaders to outsiders, all while finding someone who can satisfy both the president’s expectations and the financial markets’ demand for stability.

Choosing a new chair will be a difficult decision, and whoever gets it will inherit an institution with thousands of employees, tasked not only with setting interest rates but also with regulating banks and overseeing the U.S. payments system along with the entire global economy. That person will also have to navigate Trump’s insistence on rapid rate cuts while maintaining the Fed’s credibility in managing inflation, which we don’t see any way of doing without becoming political.

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