Whether President Donald Trump has signed a warrant to fire Federal Reserve Chair Jerome Powell or not has been a constitutional as well as economic issue of monumental proportions. According to the 1913 Federal Reserve Act, Fed governors such as the chairman can be removed only “for cause” – a criterion demanding serious misconduct, inefficiency, neglect of duty, or disability to perform the work. Such a safeguard is actually dissimilar to the normal executive branch jobs where the president has the authority to dismiss officials at his will.
The Supreme Court has reaffirmed this framework in its landmark cases, most significantly Humphrey’s Executor v. United States (1935), which held that presidents cannot remove officials at independent agencies simply because they disagree with policy. The Court recently suggested in May 2025 that the Federal Reserve is a “uniquely structured, quasi-private entity” with clear historical precedents, so Powell is owed immunity from arbitrary removal.
Trump’s current position and GOP discussions
Latest reports say Trump questioned Republican lawmakers in a closed-door Oval Office session if he should fire Powell, with the lawmakers reportedly having given such action their seal of approval. Trump was reportedly holding a draft firing letter to Powell, though later claimed he had no plans to move forward on the firing also not forgetting that he was the one who appointed Jerome Powell. The president has mentioned mismanagement of the Fed’s $2.5 billion headquarters renovation as potential justification for firing, claiming that Powell lied to Congress about cost overruns.
But Trump later retreated from the threat, stating it was “highly unlikely” he would discharge Powell “unless he has to leave for fraud.” That could indicate that the president is more making a bluff threat for political cover than actually seeking ouster.
Potential market and economic consequences
Financial markets themselves have already reacted with unprecedented sensitivity to a mere rumor of the ousting of Powell. When early reports hinted at Trump’s plans, the S&P 500 dropped by 1%, the dollar index dropped 1.2%, and Treasury yields surged. Senator Elizabeth Warren threatened that markets would “crash” if ever Trump went ahead and actually fired Powell, stressing that Fed independence is far too vital to U.S. and global financial stability.
Wall Street managers have sounded an alarm at the possibility. JPMorgan head Jamie Dimon claimed that “the independence of the Fed is absolutely critical” and that “tinkering with the Fed can often have perverse consequences, absolutely the opposite of what you might be hoping.” Deutsche Bank strategists calculated Powell’s actual firing at possibly lifting Treasury yields 20-45 basis points and the dollar declining by almost 6% against the euro.
The independence question
Independence of the Federal Reserve has been a mainstay of U.S. monetary policy for more than a century. Such independence enables the Fed to set unpopular but unpopular interest rate decisions without political pressure. Empirical evidence always reveals that economies with independent central banks enjoy lower and less volatile inflation levels.
Federal Reserve independence ensures that it is free to set interest rates without White House or Congressional influence even if political officials are against Fed policy. Isolation is with the aim of ensuring elected officials cannot pursue short-term political benefit in the form of reduced interest rates at the cost of long-term economic stability.
Legal and political implications
If Trump tried to oust Powell, it would start a never-before-seen legal war. Powell has said he would battle any removal in the courts, at his own expense if that became necessary. The Fed chairman would be afforded notice of charges and a chance to be heard and could seek an injunction to stay on while litigation continues in full swing.
The case would surely come before the Supreme Court, which has already expressed doubt regarding the president’s power to remove Fed officials on a whim. Legal scholars are in general agreement that the cost overruns in the renovation effort would not be enough “cause” for removal according to established precedents.
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