President Donald Trump’s ongoing attacks on Federal Reserve Chairman Jerome Powell center on the Fed’s decision to maintain interest rates between 4.25 and 4.50 percent.
Trump has repeatedly called for rates as low as 1 percent to stimulate economic growth.
His criticisms intensified in April, escalating to personal insults and threats to fire Powell.
The administration has also targeted the Fed’s $2.5 billion headquarters renovation, alleging mismanagement as a potential pretext for Powell’s removal.
These actions have raised alarms about the Federal Reserve’s independence, a cornerstone of U.S. economic stability.
The Federal Reserve Act of 1913 allows the president to remove the Fed chair only “for cause,” such as corruption or malfeasance.
A 1935 Supreme Court ruling reinforces that the Fed’s leadership cannot be dismissed over policy disagreements.
Legal experts note that proving cause, such as mismanagement of the renovation project, would be challenging and likely lead to a prolonged legal battle.
If Trump were to issue a removal order, Powell could sue, potentially remaining in his role during litigation, with the case possibly extending until his term ends in May 2026.
Trump’s threats have already caused market volatility, with the S&P 500 and U.S. dollar dipping briefly after reports of potential dismissal.
David Wilcox, a senior fellow at the Peterson Institute, warned that removing Powell could increase expected inflation, raise Treasury rates, and weaken the dollar.
Despite the rhetoric, some experts suggest Trump may retain Powell as a scapegoat for economic issues, given the Fed chair’s term expires soon and Trump’s sensitivity to stock market performance.
Compromising the Fed’s independence could yield short-term gains but risks long-term economic pain, as seen in historical examples from the 1960s and 1970s.