Can Trump fire Powell from the Fed?
President Donald Trump has continued his verbal attack on Federal Reserve Chairman Jerome Powell over the Fed's refusal to cut interest rates further. The move has rattled financial markets and raised concerns that Trump could try to fire the head of the U.S. central bank. It is still unclear whether the U.S. president has the authority to do so.
The 1913 act that established the Federal Reserve stipulates that members of the Board of Governors, appointed by the president and confirmed by the Senate for staggered 14-year terms, can be removed only for “cause,” meaning a violation of rules, not political disagreement. However, the law does not mention any restrictions on the removal of the Federal Reserve chairman from his four-year term.
There is no direct legal precedent, as no president has ever tried to remove a Federal Reserve Chairman. However, there are lawsuits now moving through the courts seeking Trump's removal that are being seen as possible indicators of whether he has the necessary power. One of them is currently under consideration by the Supreme Court, where any attempt to remove Powell would almost certainly be thwarted.
What does Powell's firing mean in practical terms?
Many details will depend on how Trump chooses to "fire" the Federal Reserve chief. As each of his predecessors has done, Powell holds three roles: chairman of the Federal Reserve System, a member of the Board of Governors and chairman of the Federal Open Market Committee, which sets interest rates.
Can Trump fire him just as Fed chairman?
If Trump were to try to remove Powell as chairman of the Federal Reserve system alone, Powell could remain as governor until his term ends in late January 2028. The board’s scheduled seat doesn’t open until January 2026, which would leave Trump with only the option of nominating one of the other sitting governors to be chairman. Two of the other six were appointed by Trump in his first term, Governors Christopher Waller and Michelle Bowman, whom Trump recently named as vice chair for banking supervision. Both, like Powell, have spoken out about the importance of the Fed’s independence, so it’s unclear whether either would immediately implement the rate cuts Trump wants.
Possible dismissal from the Federal Open Market Committee
Trump has no direct control over the chairman of the Federal Open Market Committee. The chairman is chosen annually by the 12-member panel, the seven governors, the president of the Federal Reserve Bank of New York and four of the other regional bank presidents. By tradition, the committee chooses the head of the Federal Reserve as its chairman, with the president of the New York Federal Reserve as its vice chairman. However, in theory, they could choose any of the members, including Powell if he is still governor.
But firing Powell as governor would have the biggest impact. If he survives the legal challenge, it would give Trump a vacant seat on the board, but also a chairman position to fill with a candidate of his choosing. It would also open the door for Trump to fire as many other governors as he wanted, to install a broader leadership of the Federal Reserve that would align with his wishes.
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