The internal tug-of-war within the Federal Reserve has been intensifying recently. The standoff between Powell and the White House seems to revolve around policy direction, but in reality, it involves a dual consideration of power restructuring and economic risks.

First, let's look at the political aspect. Powell's term as Federal Reserve Chair is not set to end until May 2026, but his board membership extends until January 2028. This time gap creates some awkwardness—there are very few instances in Fed history where a Chair has continued to serve as a board member after stepping down, with the last occurrence dating back to post-World War II. In this situation, it’s difficult for the new Chair to establish authority, and internal divisions may also arise. The Trump administration understood this well and exerted pressure through legal means—essentially aiming to force Powell to resign completely, while also signaling to other Fed officials and strengthening the White House’s influence over the central bank.

However, the real source of pressure still stems from economic risks. Over the years, sustained high interest rates have brought asset quality in sectors like commercial real estate, private credit, and small and medium-sized banks to the brink of collapse. The Trump team likely holds some more pessimistic information than publicly available data, which is why they are so eager to push the Fed to cut rates significantly, halt balance sheet reduction, and even restart quantitative easing to stabilize the economy. The problem is that Powell is principled—policy decisions must be based on real economic data and not be prematurely loosened due to political pressure. This stance is completely opposed to Trump’s logic. Trump is eager to relax monetary policy before a true crisis erupts to boost the economy and avoid political risks associated with mid-term elections.

The outcome of this game—whoever takes over—seems unlikely to change a fundamental fact: the independence of the Federal Reserve has already been substantially compromised. Once the central bank becomes a tool of the ruling party, markets will instinctively seek safe havens, which also explains why gold prices have been trending upward recently. This is not just a U.S. issue; the global financial market landscape will need to be restructured accordingly.