Staff Reporter
President Donald Trump continued his public criticism of Federal Reserve Chair Jerome Powell on Monday, targeting the Fed’s current decision to hold off on further interest rate cuts.
This has raised concerns in financial markets that Trump might attempt to dismiss the central bank leader over this issue.
Can Trump Fire Powell?
The legality of such a move remains uncertain. The Federal Reserve Act of 1913, which established the Fed, states that members of its Board of Governors can only be removed for “cause,” traditionally interpreted as misconduct rather than policy disagreements.
However, the law does not specify removal limits for the Fed chair, who is one of the seven governors and serves a four-year term.
Is This Uncharted Territory?
No president has ever attempted to fire a Fed chair, so there is no direct legal precedent. Currently, lawsuits related to other dismissals by Trump are making their way through the courts and may provide some insight into the limits of presidential power.
One such case is pending before the Supreme Court, where any attempt to dismiss Powell would likely be contested.
What Would It Mean to Fire Powell?
The implications of Trump firing Powell would depend on how he chooses to proceed. Powell serves three roles: chair of the Federal Reserve System, member of the Board of Governors, and chair of the Federal Open Market Committee (FOMC).
Can Trump Remove Him Just as Fed Chair?
If Trump were to attempt to remove Powell solely from his position as chair of the Fed, Powell could still remain a governor until his term ends in January 2028. The next vacancy on the board won’t occur until January 2026, leaving Trump with the option to nominate one of the current governors as chair.
Notably, two governors appointed by Trump—Christopher Waller and Michelle Bowman—have emphasized the importance of Fed independence, making it unclear if they would implement the rate cuts Trump desires.
What About Removing Him as FOMC Head?
Trump does not have direct authority over the FOMC chair, who is selected annually by the committee’s twelve members, including the seven governors and the president of the Federal Reserve Bank of New York. Traditionally, the FOMC chair is chosen from among its members, which means Powell could still be re-elected if he remains a governor.
… Or as a Governor?
Removing Powell as a governor would have the most significant impact. If such a dismissal were legally upheld, it would create both a board and chair vacancy that Trump could fill. This could also set a precedent for Trump to dismiss other governors, reshaping Fed leadership to align with his preferences.
Can Powell Challenge His Removal?
If Powell were to be dismissed, he would have the right to challenge the decision in federal court, although he would need to finance this effort personally. As a well-off lawyer and former private equity executive, he has the resources to do so.
Powell has consistently stated his belief that his removal is not permissible under the law and has expressed skepticism about how ongoing court cases regarding other federal officials would apply to the Fed.
Will It Actually Happen?
Reports from The Wall Street Journal indicated that Trump has considered firing Powell and replacing him with Kevin Warsh, who served as a Fed governor from 2006 to 2011. However, Warsh has advised against this, suggesting that Trump should allow Powell to complete his term, which runs until May 2026.
Additionally, White House economic adviser Kevin Hassett, another potential replacement for Powell, mentioned that the administration is still evaluating the situation.
