US President Donald Trump has publicly assailed Federal Reserve Chair Jerome Powell in recent weeks, calling him “a major loser,” and declaring that his ‘termination cannot come fast enough.’
Yet behind the fiery rhetoric lies a more complex question: Can the president fire the head of the Fed?
Trump-Powell feud heats up
Trump’s frustration with Powell isn’t new.
Since appointing him in 2017 to replace Janet Yellen, the president has repeatedly criticized Powell for not lowering interest rates fast or far enough. The most recent barrage of attacks came after Powell signaled that the central bank will not rush into cutting rates despite easing inflation and rising political pressure.
“He’s keeping rates too high,” Trump complained during a White House event on April 23. “He historically has been late … he was recommended by a certain person I’m not particularly happy with.”
Trump’s comments followed a string of similar criticisms in prior weeks.
When the European Central Bank cut its key interest rate, Trump demanded that Powell follow suit, saying on social media that the Fed chair “is always TOO LATE AND WRONG.”
Powell, for his part, has maintained the Fed’s independence and downplayed the political noise, telling reporters this past January that he has had “no contact” with Trump. The Fed chair also reiterated that rate decisions will be made based on economic data — not politics.
Powell’s appointment and the Fed’s role
The Fed chair is selected by the president and confirmed by the Senate.
Powell was first confirmed as Fed chair in February 2018 for a four year term, which ended in 2022; he was then reappointed to the position in May 2022. In addition to that, he is a member of the Board of Governors of the Federal Reserve System until 2028 unless he resigns or is removed for cause.
The Fed plays a critical role in US economic stability. Its primary tools include setting interest rates, regulating banks and maintaining price stability and full employment.
Under Powell’s leadership, the Fed aggressively raised interest rates starting in 2022 to combat inflation, which had reached levels not seen in decades. Inflation began to subside by mid-2023 and stood at 2.4 percent as of March of this year. However, the Fed has kept rates at 4.25 to 4.5 percent, citing lingering risks.
Can Trump legally fire Powell?
The short answer: not easily, and possibly not at all.
Fed governors, including the chair of the central bank, are protected by statute.
According to the Federal Reserve Act, a board member can only be removed “for cause.” Courts have traditionally interpreted “cause” to mean serious misconduct or legal wrongdoing, not simply policy disagreements.
Trump and his advisers have reportedly explored whether they could dismiss Powell under this clause. However, the Wall Street Journal reported in an exclusive that senior White House officials, including Secretary of the Treasury Scott Bessent and Secretary of Commerce Howard Lutnick, have warned the president that such a move would likely spark legal battles, spook markets and ultimately fail to deliver the interest rate cuts he desires.
Lutnick also reportedly told the president that efforts to fire the Fed chair likely would not lead to any practical change on interest rates due to board members aligning their policymaking approaches with Powell.
In an April 22 press conference, Trump appeared to walk back his earlier threats: “I have no intention of firing Powell. This is a perfect time to lower interest rates. If he doesn’t, is it the end? No. It’s not.”
The last major challenge to Fed independence occurred in the 1970s.
Oval Office recordings revealed at a later date that President Richard Nixon had pressured then-Fed Chair Arthur Burns to ease monetary policy ahead of the 1972 election. Burns acquiesced.
The result: short-term economic growth followed by years of painful inflation that ultimately required the draconian measures of Fed Chair Paul Volcker in the early 1980s to correct.
While the Fed’s independence isn’t ironclad in the Constitution, a broad bipartisan consensus has emerged over the past several decades to shield the institution from political interference.
Legal experts, including economist Tim Mahedy, argue that removing a Fed chair for policy decisions would set a dangerous precedent and invite a “systemic financial event.”
There’s also ongoing litigation that could influence the issue.
The Department of Justice is attempting to overturn a 90 year old legal precedent that protects independent agency officials like Powell from being dismissed without cause. While the effort isn’t directly about the Fed, it has raised alarms among those who see it as a potential erosion of institutional safeguards.
What’s at stake for the US economy?
Despite Trump’s desire for looser monetary policy, Powell has been backed by economists who argue that the Fed is right to proceed cautiously amid the current economic turmoil.
Interest rates remain well above the near-zero levels of the COVID-19 era, and while inflation has cooled, new risks — such as Trump’s escalating tariffs on Chinese imports — could stoke price pressures again.
Trump has imposed 145 percent tariffs on many Chinese goods, with exemptions for some electronics. He told reporters that tariffs will ‘come down substantially,’ but has not announced a timeline.
Meanwhile, major retailers like Walmart (NYSE:WMT) and Target (NYSE:TGT) warned during a White House meeting that tariffs could increase costs for consumers. Even Tesla (NASDAQ:TSLA) CEO Elon Musk, now a senior adviser in the Trump administration, said in a recent earnings call that he will push the president to roll back tariffs.
Powell stands firm — for now
Powell has consistently affirmed that the Fed will base its decisions on data, not presidential pressure.
“The arrangement of central bank independence is very widely understood and supported in Washington, in Congress, where it really matters,” he said during a mid-April speech in Chicago.
Still, the president’s attacks have rattled some on Wall Street, not least because Trump has shown more willingness in this term to test legal and institutional limits. In contrast to Trump’s first term, when Powell faced pressure, but never a formal removal threat, today’s atmosphere has some investors nervously watching for signs of a deeper standoff.
For now, however, Powell’s job appears safe. Trump’s advisers appear to have convinced him — at least temporarily — that firing Powell would hurt more than help. While the battle over interest rates may continue, Powell looks set to remain at the helm of the US central bank until 2026 — whether the president likes it or not.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
