Market Analysis

Can Trump Fire Fed Chair Jerome Powell? Here’s What We Know

Mellissa · 22 Apr30.7K Views

Image Credit: Reuters

President Donald Trump continued his verbal attacks on Federal Reserve Chairman Jerome Powell on Monday, criticizing the Fed for its refusal to cut interest rates further. This ongoing pressure is fueling concerns in financial markets about the possibility that Trump may attempt to remove Powell from his position.

Can Trump Fire Powell?

The question of whether Trump has the authority to dismiss Powell remains unclear. The Federal Reserve Act of 1913 allows for the removal of Board of Governors members, including the Fed chair, only for "cause," traditionally understood as misconduct rather than policy differences. However, the law does not specify any restrictions on removing the Fed chair during their four-year term, raising questions about whether Trump could remove Powell from this role.

Uncharted Territory?

There is no precedent for a president attempting to fire a Fed chair, so this situation would be legally untested. Ongoing lawsuits related to Trump’s other firings are being closely monitored for any indications of how courts might handle a potential challenge to his authority over the Fed.

What Would It Mean Practically?

The impact of firing Powell would depend on how Trump moves forward with the action. Powell holds three key roles: Chair of the Federal Reserve, a member of the Board of Governors, and Chair of the Federal Open Market Committee (FOMC).

Could Trump Remove Him as Fed Chair?

If Trump were to remove Powell solely as the Fed chair, Powell could still remain a governor until his term ends in January 2028. The next available board seat wouldn't open until 2026, so Trump could only nominate a new chair from the existing governors. Two of those governors, Christopher Waller and Michelle Bowman, were appointed by Trump, but both have expressed support for the Fed’s independence, meaning they might not push for the rate cuts Trump desires.

Could Trump Remove Him as FOMC Head?

Trump has no direct power to control who leads the FOMC. The chair is chosen annually by the 12-member panel, including the seven governors and presidents of regional Fed banks. While traditionally the FOMC selects the chair, the panel could choose any member, including Powell, if he remains a governor.

Could Trump Remove Him as a Governor?

Firing Powell as a governor would have the most significant impact. If legally upheld, it would create vacancies on both the Board of Governors and the chair position, which Trump could fill with his own nominees. This could allow him to reshape the Fed’s leadership to align with his policies.

Could Powell Challenge a Removal?

If Powell were removed, he would likely challenge the decision in court, although he would need to fund the legal process himself. Powell has stated that he believes his removal is not permitted under the law and that the legal challenges related to Trump’s other firings will not apply to the Fed.

Will It Happen?

Reports suggest Trump has considered replacing Powell with Kevin Warsh, a former Fed governor. However, Warsh is reportedly advising against this, suggesting Trump let Powell remain until his term as chair expires in May 2026. White House economic adviser Kevin Hassett has also indicated that the matter is under review within the administration.