Trump Renews Push for Powell to Leave Fed as U.S. Borrowing Costs Hit 24-Year High

President Donald Trump has renewed his demand for former Federal Reserve Chair Jerome Powell to leave the central bank entirely, bringing their long-running dispute back into focus at a time when U.S. borrowing costs are climbing to levels not seen in more than two decades.
Trump called for Powell to resign from the Federal Reserve’s Board of Governors after the central bank’s inspector general released a report examining major cost overruns in the renovation of its Washington headquarters.
The watchdog found serious weaknesses in the way the project was managed and said the Fed failed to use several available measures that could have helped control costs.
But it did not find grounds for a criminal referral or evidence of administrative misconduct connected with the project. Investing.com
Trump nevertheless argued that Powell should leave the board and suggested the government could pursue legal action against him.
The renewed confrontation comes just as financial markets are dealing with another problem: sharply rising long-term interest rates.
Powell is no longer Fed chair
One important distinction is that Powell no longer leads the Federal Reserve.
His term as chair ended in May 2026, and Kevin Warsh succeeded him. The Federal Reserve officially lists Warsh as chairman of the Board and the Federal Open Market Committee.
Powell, however, remains a member of the Board of Governors and continues to participate in monetary-policy decisions. Federal Reserve
That arrangement is significant because Powell chose not to leave the Fed when his chairmanship ended.
Speaking in April, Powell said he intended to remain on the board for a period after stepping down as chair because he was concerned about legal and political pressure on the institution.
He said his concern centred on what he described as attacks that could threaten the Fed’s ability to make monetary-policy decisions without considering political factors. Federal Reserve
What happened with the Fed renovation?
The renovation of the Federal Reserve’s historic Eccles and 1951 buildings in Washington has become one of the main sources of the dispute.
According to the Federal Reserve’s Office of Inspector General, construction costs associated with the project increased from $921 million in the Fed’s February 2020 budget to $2.018 billion in its 2024 revised budget. Federal Reserve OIG
The watchdog concluded that the Fed had not effectively managed important parts of its construction contract and that its internal governance was not adequate for a project of such scale and complexity.
It said officials repeatedly departed from cost-management provisions and failed to take some actions that might have limited increases in spending.
The inspector general issued seven recommendations, which the Federal Reserve accepted. Federal Reserve OIG
At the same time, the investigation did not support allegations that Powell had committed a federal crime.
Reuters reported that the inspector general found neither grounds for a criminal referral nor administrative misconduct arising from the renovation. Reuters
The distinction is important: the watchdog found management and cost-control failures, but that is different from finding criminal wrongdoing.
Trump and Powell have clashed for years
The renovation dispute is only the latest chapter in a much longer disagreement between Trump and Powell.
Trump originally elevated Powell to lead the Federal Reserve during his first presidency in 2018.
Their relationship later deteriorated as Trump repeatedly pushed for lower interest rates and criticised Powell when the Fed did not reduce borrowing costs as aggressively as the president wanted.
During Trump’s second term, the renovation project became another focus of criticism.
A Justice Department investigation into Powell was eventually dropped in April 2026, and the subsequent inspector-general review found no basis for criminal action. Reuters
Trump has continued to criticise Powell despite Powell no longer serving as Fed chair.
Bond markets are creating a much bigger economic problem
The renewed Powell dispute comes as the United States faces some of its highest long-term borrowing costs in decades.
On October 1, the yield on the benchmark 10-year U.S. Treasury note briefly climbed to about 5.34%, its highest level since 2002.
The yield later eased, but the move followed an exceptionally difficult quarter for government bonds.
Reuters reported that the quarterly increase in the 10-year yield was the largest since 1994. Reuters
A bond yield represents the return investors demand for lending money.
When investors sell government bonds, prices fall and yields generally rise.
Higher Treasury yields matter far beyond Wall Street because they influence borrowing costs across the economy.
Mortgage rates, corporate loans and other forms of long-term financing can all become more expensive when government yields remain elevated.
Why are yields rising?
There is no single reason for the bond sell-off.
Investors have been responding to a combination of persistent inflation concerns, elevated energy prices, large government borrowing needs and expectations that interest rates may need to remain high.
Strong investment associated with artificial intelligence and data-centre construction has also supported economic activity while increasing competition for capital.
Government debt is another concern.
When the U.S. Treasury needs to issue large amounts of bonds, investors have to absorb that additional supply. If buyers demand better returns, yields can rise.
Similar pressures have appeared outside the United States.
Government borrowing costs in France, Britain and Japan have also reached levels not seen for many years, making the current sell-off a global phenomenon rather than solely an American one. Reuters
Why the Fed dispute matters
The Federal Reserve sets short-term monetary policy, but it does not directly control every interest rate in the economy.
Long-term Treasury yields are determined in financial markets and can rise even when investors expect the central bank eventually to lower short-term rates.
That creates an awkward situation for any administration seeking cheaper borrowing.
Political pressure on the Fed does not automatically translate into lower mortgage rates or lower government borrowing costs.
Investors also pay attention to inflation expectations, government finances and confidence in economic institutions when deciding how much return they require to hold long-term debt.
This is one reason debates over central-bank independence attract so much attention from economists and financial markets.
Supporters of Fed independence argue that monetary-policy decisions should focus on inflation, employment and financial stability rather than short-term political objectives.
Presidents, however, are free to criticise Federal Reserve policy, and Trump has repeatedly argued that U.S. interest rates have been unnecessarily high.
Warsh now has responsibility for monetary policy
Although much of the political argument continues to revolve around Powell, responsibility for leading the central bank now belongs to Kevin Warsh.
Warsh was sworn in as chairman in May and currently heads the Federal Open Market Committee, which sets the Fed’s main policy rate. Federal Reserve
He inherited a difficult environment.
Inflation remains a concern, energy prices have been volatile, government borrowing is high and bond markets are demanding much greater returns from long-term debt.
That means lowering borrowing costs may not be as straightforward as simply reducing the Fed’s short-term policy rate.
A central bank that cuts rates too aggressively while investors remain worried about inflation could potentially see long-term yields stay elevated or move even higher.
Two stories are now colliding
The Powell dispute and the bond-market sell-off are separate developments, but they are increasingly intersecting.
One is an institutional and political argument about accountability, Federal Reserve independence and Powell’s remaining role at the central bank.
The other is a financial-market problem involving inflation, government debt and the price investors demand to lend money.
Together, they highlight the challenge facing Washington.
Trump wants lower borrowing costs and has repeatedly criticised Fed officials over interest-rate policy.
But the bond market is currently moving in the opposite direction, with investors demanding some of the highest long-term yields seen in a generation.
And regardless of who occupies the Fed chair, bringing those borrowing costs back down will depend on more than political pressure.
Inflation, fiscal policy, economic growth, energy prices and investor confidence will all play a role in determining what happens next.