Does Trump have the authority to fire Fed chair Powell?

Mint

18-07-2025

WASHINGTON—President Trump asked Republican lawmakers this week whether he should fire Federal Reserve Chair Jerome Powell, whom he appointed to the position in 2017. The move followed months of criticism by Trump of Powell, largely over his refusal to cut interest rates.
Underneath the controversy lies a central question: Does Trump actually have the authority to fire Powell?
The circumstances under which a president in fact can fire a Fed chair have never been crystal clear, experts say. But here are a few questions to consider if Trump takes his beef with Powell to the next level.
As chair, Powell is one of seven members of the central bank's board of governors. Under a 1935 amendment to the Federal Reserve Act, those individuals can only be removed by the president 'for cause." That position was strengthened by a recent Supreme Court decision that boosted the president's authority to fire independent-agency officials without cause, but carved out an exemption for the Fed. More on that later.
The chair serves a four-year term, while governors serve staggered 14-year terms—a structure designed to bolster the Fed's independence from political whims of the day.
In Powell's case, his chairmanship ends in May of 2026, while his term as governor runs through January 2028.
That means that even if Powell were demoted from his position as chair—a possibility the statute doesn't explicitly address—Trump wouldn't necessarily be rid of him.
The Federal Reserve Act doesn't define it. But other laws governing independent agencies are a bit more specific and might provide courts guidance should Trump try to fire Powell 'for cause."
The Federal Trade Commission Act says commissioners may be removed by the president for 'inefficiency, neglect of duty or malfeasance in office." Members of the National Labor Relations Board can similarly be removed by the president 'for neglect of duty or malfeasance in office, but for no other cause."
That suggests Trump's displeasure with Powell, fundamentally a policy dispute over the appropriate level of interest rates, may be insufficient grounds for dismissal on its own.
Trump said this week it was 'highly unlikely" that he would fire Powell 'unless he has to leave for fraud," suggesting the door was still open to a removal effort.
Trump and his advisers have homed in on a renovation project of the Fed's office buildings in Washington that has been troubled by delays and cost overruns. Cost overruns are common in construction projects, and there have been no allegations of fraud levied at Powell.
Russell Vought, Trump's budget director, implied in a letter this month that Powell either made false statements to Congress about the $2.5 billion renovation or failed to comply with permitting rules. He said last week Powell would face 'very, very tough questions" from Trump advisers serving on a capital-area planning commission.
On July 17, Vought told reporters he is trying to arrange a tour of the project for himself, planning-commission members and senators. 'We're going to see where this takes us, but this is not something the American people should expect from their government," Vought said.
Trump's second term has been marked by far-reaching efforts to consolidate presidential power and stretch its boundaries.
One of the avenues he has pursued is a conservative legal idea known as the 'unitary executive theory." It argues that the president has sole authority over the executive branch, including independent agencies like the Fed, which Congress set up to operate more autonomously than cabinet agencies.
The Supreme Court largely validated this theory in a lawsuit over Trump's removal of Gwynne Wilcox, a Democratic member of the National Labor Relations Board. But the conservative majority carved out an exception for Fed officials, making clear that its ruling doesn't 'necessarily implicate the constitutionality of for-cause removal protections" for them.
No. Monetary-policy decisions are made by a committee of central bankers: the seven governors in Washington, plus five of 12 presidents of the Fed's regional reserve banks. Only one or two of the governors are currently seen as favoring lower interest rates immediately, and most have terms that continue through the end of his presidency.
Fed officials unanimously voted to hold rates steady at their most recent policy meeting, in mid-June. That suggests a low appetite for slashing rates to 1% as Trump has demanded, from their current level of around 4.3%.
In theory, if Trump succeeds in firing Powell, the rest of the committee may not go along with the interest-rate recommendations of whoever takes his place. But Trump could also try to fire other governors and even bank presidents to create a majority on the committee favorable to him.
Trump is considering naming Powell's successor early, The Wall Street Journal has reported. If that person were to express a preference for lower rates, some administration officials hope financial markets would incorporate such guidance, thereby achieving Trump's goal of reducing borrowing costs.
But Trump's outbursts over Powell and interest rates have generally had the opposite effect, sparking market volatility and occasional jumps in long-term borrowing costs. Many investors see an independent central bank as a key pillar for long-term economic stability.
A recent survey of economists by the Journal found 57% expect Trump's stated preference for lower interest rates to have no effect on monetary policy under the next Fed chair. But 36% of the economists thought the president's views would cause rates to be lower.
The last president to significantly interfere in Fed policy was Richard Nixon, who surreptitiously pressured then-Fed chair Arthur Burns to hold rates down ahead of his 1972 re-election campaign. That didn't go over well: Inflation spiraled out of control within a few years.Subsequent presidents occasionally expressed a preference for lower interest rates or sought to influence the Fed through appointments. But none have confronted a Fed chair as directly, publicly or personally, as Trump has attacked Powell.
This explanatory article may be updated periodically.
Write to Paul Kiernan at [e-mail]