What would the fallout be if Donald Trump tries to fire the Federal Reserve chief?

SBS Australia

17-07-2025

US President Donald Trump has again said he has no immediate plans to fire the head of the Federal Reserve, Jerome Powell, after a string of media reports suggesting otherwise. Trump has repeatedly lashed out at Powell in recent months for not lowering interest rates and what he sees as an overpriced renovation of the Fed's headquarters in Washington. On Wednesday, he continued his criticism, saying while it was "unlikely" Powell be fired soon, "unless he has to leave for fraud". There has been no evidence of fraud, and the Fed has pushed back on criticism.
Trump also told reporters that he had floated the idea of getting rid of Powell with Republican lawmakers in a meeting on Tuesday.
No president in recent US history has gone after the head of the Federal Reserve, which is supposed to operate independently from the government.
So, does Trump have the power to fire Powell, and what would the economic fallout be of any attempt to do so?
Can the president fire the Federal Reserve chief? According to the Federal Reserve Act of 1913, the chair of the bank can only be dismissed "for cause", which is broadly interpreted as relating to extraordinary cases of gross misconduct. Speaking to reporters on Wednesday, Trump appeared to double down on the Fed's renovation as a new line of attack, stating that it was "possible there's fraud involved" while complaining about the cost of the project. "There could be something to that, but I think he's not doing a good job. He's got a very easy job to do. You know what he has to do? Lower interest rates," he added.
The comments prompted concerns from Democrats that Trump is manufacturing outrage over the building works to use them as grounds for Powell's dismissal.
If Trump were to fire Powell, over what many view as a policy dispute, it would be unprecedented and could end up in court.
But whether or not the Supreme Court — which has consistently ruled in Trump's favour throughout his second term — would seek to protect the impartiality of the central bank is currently being hotly debated by US economists, scholars, and analysts.
A 'dreadful idea' and 'very significant' market reaction Former Fed officials and financial experts have consistently warned that the economic fallout from any attempt to fire Powell would be swift and far-reaching. "If there were an effort by the president to remove the chair, the market reaction would be very significant — well before any court had an opportunity to pass on the issue," former Fed board member Daniel Tarullo told the Harvard Gazette in late April.
In an interview with CNBC on Wednesday, Roger Altman, who was deputy Treasury secretary under former President Bill Clinton, described Trump's impulse to interfere with the Fed as "a dreadful idea," pointing to the economic downturn other countries that have meddled with their central banks have faced.
Republican Senator Thom Tillis of North Carolina delivered a spirited defence of an independent Fed on Wednesday. "There's been some talk about potentially firing the Fed chair," said Tillis, a member of the Senate Banking Committee, which oversees the Fed and confirms presidential nominations to its Board. Subjecting the Fed to direct presidential control would be a "huge mistake," he said. Meanwhile, a research paper by Wolfe Research, which gamed out possible market scenarios if Trump decides to go after Powell, stated that regardless of whether it was deemed legal or not, the result would be an extreme "mess". "We expect, as does everyone else, that it would be significantly negative for markets, likely driving both an equity selloff and a counterproductive spike in long-term yields," the firm wrote in a briefing. — Additional reporting by Reuters