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The US President says Jerome Powell may have misled Congress. But firing the Fed chief requires legal ’cause’, and proving that won’t be simple
Donald Trump has suggested that he is considering removing Jerome Powell from office. (Image: Reuters)
In his second term as US President, Donald Trump has revived a familiar feud, this time with potential consequences for global financial stability. The target: Jerome Powell, Chair of the US Federal Reserve. Trump has suggested, both publicly and privately, that he is considering removing Powell from office over issues including a multibillion-dollar renovation of the Fed’s headquarters in Washington, DC.
The possibility has reignited a legal and political debate in Washington: Can Trump legally fire the Federal Reserve Chair before his term ends? And if he does, would it undermine central bank independence or market confidence?
What Did Trump Say About Removing Powell?
Earlier this month, Trump told a group of House Republicans that he was considering firing Powell and even showed them a draft termination letter, according to a CBS News report. The meeting reportedly took place at the Capitol Hill Club in Washington.
A few days later, Trump publicly walked back the suggestion, telling reporters: “I wouldn’t do it unless he had to leave for fraud or something. It’s highly unlikely.”
Despite the apparent softening of tone, the comment triggered alarm among investors and lawmakers alike, particularly since Trump has a long history of clashing with Powell over monetary policy.
Why Is Trump Unhappy With Powell This Time?
During Trump’s first term, his criticism of Powell centred on monetary policy, particularly the Fed’s reluctance to cut interest rates. However, this time the disagreement is not about policy, it’s about alleged misgovernance. At the centre of the controversy is a $2.5 billion renovation of the Fed’s iconic headquarters in Washington, DC.
According to Associated Press, Trump has alleged that Powell misled lawmakers about the scale of the project and how it was being financed. A key point of contention is the long-term lease agreement the Fed signed with the General Services Administration (GSA)—the federal agency responsible for managing government property.
Trump and some of his allies argued that the GSA failed to properly inform Congress before approving the lease extension. They also claimed that Powell may have overstepped or been involved in what they describe as “unauthorised” or insufficiently transparent decision-making around the deal.
The criticism intensified after Russell Vought, Director of the Office of Management and Budget (OMB) and a Trump ally, publicly flagged concerns about the Fed’s spending on the renovation.
In response, Powell formally asked the Fed’s Inspector General to conduct a fresh review of the renovation project, signalling an attempt at transparency amid political scrutiny.
What The Law Says: Can The President Fire The Fed Chair?
The US Federal Reserve Act allows the President to remove a Fed governor “for cause”, but not at will. That clause has been narrowly interpreted by courts to preserve the Fed’s independence from political influence.
The 1935 Supreme Court case, Humphrey’s Executor v. United States, set the legal precedent: the President cannot remove officials from independent agencies simply due to policy disagreements. “Cause” must involve serious misconduct, legal violations, or gross neglect of duty.
Trump cannot legally fire Powell for disagreeing with interest rate policy or the Fed’s handling of inflation. But in this case, he is not citing monetary policy; he is pointing to alleged mismanagement of a multibillion-dollar renovation project and possible lack of Congressional oversight.
Is There Legal “Cause” To Remove Powell?
So far, no public evidence has emerged to show that Powell engaged in conduct that meets the legal threshold for removal. Fed officials have defended the renovation project, saying the headquarters is structurally unsound and in need of major upgrades. They maintain that the GSA lease extension was handled through proper channels and that all financial disclosures were made according to law.
Legal analysts warn that unless the White House can prove Powell knowingly misled Congress or exceeded his authority, any removal attempt would almost certainly be challenged in court.
What Have Republicans Said?
Even within Trump’s party, there is reluctance around firing Powell. Senator Thom Tillis, a Republican on the Senate Banking Committee, publicly cautioned against the move: “Removing Powell would be a mistake. The independence of the Fed is critical for investor confidence.”
Senator Mike Rounds echoed that concern, saying: “I’m not sure that would be in the best interest of stability for the economy.” Senator John Kennedy also weighed in, stating that while he supports oversight of the Fed’s spending, abrupt removal of Powell could “rattle the system.”
What Options Does Trump Actually Have?
Despite the speculation, Trump’s legal room for action remains narrow. Here are the possible scenarios:
- Wait until May 2026, when Powell’s term as Chair ends. Trump can then nominate a successor without controversy.
- Attempt removal “for cause”, citing the renovation controversy. This would almost certainly trigger a legal battle, and any success would depend on the outcome of the Inspector General’s review, specifically whether it produces legally actionable evidence of misconduct or misrepresentation.
- Apply political pressure, urging Powell to resign voluntarily. But this risks backlash and market instability.
- Stack the Board with Trump allies. While this would not remove Powell, it could influence decision-making at the Fed over time.
In all cases, any premature removal would face legal, political, and economic headwinds.
Why Central Bank Independence Matters
The Federal Reserve is structured to operate independently so it can manage inflation, employment, and financial stability based on economic data, not political cycles.
Any overt interference in that independence, such as an attempt to remove the Chair without strong legal grounds, would raise red flags globally. It could also weaken the US dollar, raise inflation expectations, and reduce the Fed’s ability to control interest rates effectively.
In a 2019 speech, Powell himself said: “The Fed’s independence is essential to its ability to effectively pursue its Congressional mandate of maximum employment and stable prices.”
Even the perception of a politically compromised Fed could erode trust, not only in the US economy but in global financial markets.
What’s Next?
Powell’s term as Fed Chair runs until May 2026, and his term as a governor lasts through 2028. Unless Trump initiates formal removal proceedings—supported by legal findings—Powell is expected to remain in office.
However, the threat itself has already caused ripples. Markets are jittery, lawmakers are divided, and questions around central bank independence are back in the spotlight.
With inflation slowing and interest rate cuts under discussion, any disruption to Fed leadership could affect not just policy but also market psychology.
Yes, Trump Can Fire Powell, But Only Under Strict Legal Grounds
Donald Trump does have the authority to remove Jerome Powell—but only if he can establish “cause” as defined under US law. Allegations about the renovation project, even if politically sensitive, would require evidence of wrongdoing to meet that bar. Disagreements over monetary policy or budget priorities do not qualify.
Any premature move would likely be met with court challenges, market backlash, and warnings from economists and lawmakers concerned about Fed independence.
As things stand, Powell remains in his post. But the relationship between the White House and the Fed has rarely been more strained, and the risks, both legal and economic, remain high.
Karishma Jain, Chief Sub Editor at News18.com, writes and edits opinion pieces on a variety of subjects, including Indian politics and policy, culture and the arts, technology and social change. Follow her @kar…Read More
Karishma Jain, Chief Sub Editor at News18.com, writes and edits opinion pieces on a variety of subjects, including Indian politics and policy, culture and the arts, technology and social change. Follow her @kar… Read More
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