Though the Supreme Court recently issued an opinion suggesting at least six justices would rule against it, "Can Trump fire Powell?" may be a moot question as the White House explores its power to try to get what the president wants: lower interest rates.
The Office of Management and Budget, for example, has cited cost overruns for the project to renovate facilities in Washington D.C. as evidence of Fed Chair Jerome Powell's broad mismanagement of the central bank.
The leader of the National Economic Council agreed the Federal Reserve is burdened by "a real problem of oversight and excess spending."
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Treasury Secretary Scott Bessent, meanwhile, said there's no reason for Powell to resign but supports an investigation of the Fed's renovation project as part of a review of whether "the organization has succeeded in its mission."
Indeed, President Donald Trump recently reiterated his criticism of Powell, whom he nominated during his first administration in November 2017 to replace outgoing Fed Chair Janet Yellen.
The president said his man has "done a bad job, but he's going to be out pretty soon anyway. In eight months he'll be out."
President Trump told White House reporters on April 22 that he "never did" intend to fire Powell. "The press runs away with things. No, I have no intention of firing him."
The president didn't stop there, though: "I would like to see him be a little more active in terms of his idea to lower interest rates."
He added, "We think that it's a perfect time to lower the rate, and we would like to see our chairman be early or on time as opposed to late. Late isn't good."
Bessent has been named in discussions of those who will replace Powell as Fed chair.
"Can Trump fire Powell?" might be a bad question anyway
Powell has asked the Fed's inspector general to review the $2.5 billion project.
According to Axios, "The Trump administration is using the Fed's expensive overhaul of two historic buildings on the National Mall as a lever to try to force out Powell, who has rebuffed the president's demands to cut interest rates."
And the juice may not justify the squeeze.
"All this political pressure on the makers of monetary policy could actually backfire on Trump," writes Mizuho Securities Chief U.S. Economist Steven Ricchiuto. "In essence, be careful what you wish for, as you may get it!"
Ricchiuto says "a Fed that simply validates the administration’s fiscal agenda by attempting to keep rates low at both ends of the curve may result in higher rates."
The economist explains that easing the federal funds rate while the economy is growing and with underlying inflation "stuck at 3%, not 2%, will unleash inflation expectations and in the process increase the inflation risk premium."
"Can Trump fire Powell?" is no longer about executive authority
The Supreme Court did not explicitly overrule a 90-year-old precedent in its May 22 opinion, but it did allow President Trump to fire two members of other federal agencies' boards. And it offered a two-sentence summary on the not-yet-ripe can Trump fire Powell? question.
"Finally," the six-member majority wrote in an unsigned opinion, "respondents Gwynne Wilcox and Cathy Harris contend that arguments in this case necessarily implicate the constitutionality of for-cause removal protections for members of the Federal Reserve's Board of Governors or other members of the Federal Open Market Committee.
"We disagree. The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States."
In dissent, Associate Justice Elana Kagan wrote that the majority decision results in "the creation of a bespoke Federal Reserve exception."
Investors, traders and speculators are already pricing in their discomfort with the very question and its potential to undermine the independence of the world's most important central bank.
Trump v. Powell
President Trump's April 2 "Liberation Day" tariffs announcement had already generated unprecedented levels of volatility in both stock and bond markets.
In an April 16 appearance at the Economic Club of Chicago, Powell described the uncertainty from a central banker's perspective. "These are very fundamental policy changes," Powell said. "There isn't a modern experience of how to think about this."
Noting that "the level of the tariff increases announced so far is significantly larger than anticipated," Powell explained that the Fed may find itself in a challenging scenario where its dual-mandate goals are in tension.
Because of Trump's policy, "unemployment is likely to go up as the economy slows," and "in all likelihood," inflation is likely to go up as well.
Trump responded the following morning with a post on Truth Social calling for the Fed chair's "termination" and has continued to use his social media platform to disparage Powell.
Meanwhile, a series of articles in The Wall Street Journal and The New York Times have detailed months of conversations between Trump and various White House aides about firing the Fed chair.
Analysts v. Trump
"Trump's renewed attacks on Fed Chairman Jerome Powell raise policy uncertainty but are unlikely to lead to Powell's removal," writes BCA Research macro strategist Felix Vezina-Poirier.
Noting that Powell's term runs through May 2026, Vezina-Poirier says firing him at this point would be "complex, politically risky, and legally lengthy and difficult." Powell also represents a "politically convenient scapegoat" for Trump as sentiment on the economy and markets slide.
"Moreover," the strategist explains, "firing Powell would likely backfire by pushing long-term Treasury yields higher, contradicting the administration's stated preference for lower yields." He adds that "potential replacements … would generally lean toward tighter monetary policy, not the easier stance Trump desires."
Powell's stated priority is to ensure inflation expectations remain well anchored. He feels he has room for patience on the growth side. And there will be no "Powell Put" to save the stock market.
Vezina-Poirier concludes that "Powell's removal would prompt an immediate bear steepening," which means markets would "price in higher term premia and inflation" in the form of higher interest rates.
"Even if the noise regarding Powell were to decline," suggests the forex research team at Barclays, "the dovish pressure on the Fed could persist, which would likely further erode market confidence in the integrity of the greenback."
Related content
-
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)State Taxes Living in one of these places could lower your 2025 investment taxes — especially if you invest in real estate.
-
Want To Retire at 55? See If You Can Answer These Five QuestionsWho said you can’t retire at 55? If you say yes to these questions, you may be on your way to an early retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
-
S&P 500 Slips Ahead of Fed Week: Stock Market TodayAll eyes are on the Federal Reserve ahead of next week's critical policy meeting.
-
September Fed Meeting: Live Updates and CommentaryThe September Fed meeting is a key economic event, with Wall Street keyed into what Fed Chair Powell & Co. will do about interest rates.
