• Trump criticized Jerome Powell for not lowering interest rates and hinted at removing him from office.
  • The Federal Reserve chair’s independence is legally protected, making it difficult for the president to dismiss him without valid cause.
  • If Trump tries to remove Powell, it could lead to a legal battle over the interpretation of the law and the Fed’s autonomy.

The Federal Reserve is the central bank of the US. It sets interest rates and makes decisions to maintain the stability of the economy. The Fed is supposed to be independent. This means it should not be controlled by the president or politicians.

Jerome Powell is currently the Federal Reserve chair. In his view, the Fed’s independence is protected by law. It means that the president cannot fire him just because he makes other policy choices. Nevertheless, President Donald Trump often disagreed with Powell. Trump said he could fire him if he wanted to.

The statute governing the Fed stipulates that a chairman can only be ousted “for cause.” That is to say, there must be some extreme reason, like breaking the law, neglecting his duty, or being untruthful. Disagreement over interest rates is not enough.

What the Law Says About Removing the Fed Chair

A Supreme Court case, “Humphrey’s Executor,” created this rule during the 1930s. The court said that some officials cannot be fired for political reasons. This case continues to protect individuals like the Fed chair. Congress utilized this idea when they established Fed governors’ lengthy, 14-year terms.

Trump was told by White House attorneys that he couldn’t dismiss Powell simply because he didn’t like his policies. But Trump still kept saying that he wanted Powell to go. He even called him “too late” and said that he was “playing politics.”

Trump’s trade policies and tariffs created uncertainty in the economy. That put extra pressure on the Fed to move. Trump wanted lower interest rates, to get the economy growing. But the Fed was worried about speeding up inflation. Cutting rates too early would make prices increase even more.

Most legal experts believe that getting rid of Powell would lead to a courtroom. It would be a great legal battle. There is no definitive answer yet because no president has succeeded in getting rid of a Fed chair on policy grounds.

Trump’s Thoughts on Jerome Powell

Trump recently threatened to replace Powell again. Trump said that Powell could be gone “real fast” if he wanted him out. He even said he could replace him with Kevin Warsh, a former Federal Reserve staffer. But Warsh warned Trump not to do so, saying that it would harm the independence of the Fed.

Treasury Secretary Scott Bessent also warned against removing Powell. He called the Fed’s independence a “jewel box” that must be preserved. He said the administration can start looking for Powell’s replacement this fall.

Powell’s tenure as Fed chairman will expire in May 2026. His term as a Fed governor will expire in 2028. For now, he insists that he will not let politics influence policy at the Fed. He insists that legislation insulates the Fed from outside pressure.

If the Supreme Court changes the rules of yore, it might make the Fed less independent. That would be a big change. The U.S. would then be the only major country with a central bank that is not insulated from politics.

Ultimately, no one really knows what the end result will be. But as things are today, Powell is not moving. And the fight over the independence of the Fed continues.

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