Following his criticism of Powell on interest rates, Trump has accelerated his attacks on Powell. “Setting markets up for the big No. 1 loser,” Trump said on social media, demanding an immediate interest-rate cut. This most recent outburst follows Trump’s assertion that Powell’s “termination cannot come fast enough,” even suggesting his administration is looking into whether firing Powell is an option. This comes as the Fed keeps interest rates on hold to tame stubbornly high inflation. But does Trump have the power to get rid of Powell?
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Presidential Removal Authority
Theoretically, a President can fire a Fed chair at his discretion, but not practically. Powell can, however, be dismissed just like any other appointee on the Federal Reserve Board—but only on account of “cause.” This provision has its grounding in a prominent Supreme Court case of 1935, which discussed the enforcement of a politically independent federal agency like the Fed, stating that such agencies should work free from direct political control to prevent exerting undue influence over them. Trump, despite standing against political norms, cannot divest Powell of his position except for some special reason, say, for example, misconduct.
Powell’s Initial Nomination and Interest-Rate Complaints
Trump first nominated Jerome Powell in 2017, while Joe Biden gave Powell a second nomination in 2021. Trump’s ongoing complaints center around the Fed keeping interest rates high, fearing it obstructs economic growth. Current key interest rates range from 4.25% to 4.5%, at levels not seen since 2007; Trump claims this is bad for the economy now that inflation rates seem to recede. Inflation may have come down from peaks reached during 2022, but it is still above the Fed’s 2% target, and this is causing Powell and some Fed officials to think twice about rate cutting.
Effects of Trump Tariffs
Powell has also indicated the Fed is watching closely the consequences of Trump’s trade policies and especially his tariffs. According to Powell, these measures were larger than anticipated and are likely to be exerting inflationary pressure; nevertheless, he has taken the position that the Fed should await further developments before altering its monetary policy stance. That caution stands in stark contrast to Trump insisting on acting without delay.
Wall Street’s Response to Trump’s Criticism
Investors fear Trump’s harsh words for Powell and the looming threat to Fed independence. Wall Street is quietly unnerved, while major indices, the S&P 500 and Dow Jones Composite, faced serious losses with Trump’s newest attack. Market analysts have warned that continued aversion to Powell regarding rates, or pressure to act from Trump, could throw the economy into turmoil for years. Traditionally, independence from political interference has been cited as central to the Federal Reserve’s ability to maintain economic stability.
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For Powell’s Independence
Quite a number of lawmakers came in to defend Powell and the Fed’s independence, including Republican Senator John Kennedy. They contend that the president has no right to remove the Fed chair and that independence is vital for credibility in the economy. Other Federal Reserve officials, including Chicago Fed President Austan Goolsbee, have expressed the same concerns, warning that damaging the credibility of the central authority could lead to higher inflation and slower economic growth.
The Road Ahead for Jerome Powell
Despite the drama surrounding Trump’s attacks on Powell, they do not affect the staunch legal clause that protects the Fed chair against arbitrary dismissal. With Powell being in office through May 2026, his position is secure unless there is a drastic legal or ethical breach against him. Prolonged defense by lawmakers and economists against the independence of the Fed alike suggests any attempt to oust Powell will be resisted in the strongest possible terms. What remains is that an interface between political pressure and economic policy would continue to dictate the country’s monetary policy in the foreseeable future.
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The president might have no intention to fire Powell, lets see how this story unfolds.
