Topline
President Donald Trump and Federal Reserve Chairman Jerome Powell’s yearlong feud escalated Thursday as the president urged Powell’s “termination” and is reportedly discussing firing the central banker, the latest example of Trump testing the limits of the historic relationship between the Oval Office and the Fed and bringing questions of whether Trump has the authority to oversee such a “termination.”
President Donald Trump, left, walks with Jerome Powell in 2017.
Key Facts
“Powell’s termination cannot come fast enough!,” Trump posted Thursday to his Truth Social platform, potentially discussing the end of Powell’s term as the U.S.’ top-ranking central banker slated for May 2026, though “termination” certainly connotes a more unnatural end to Powell’s position.
The Wall Street Journal reported later Thursday the president has privately proposed firing Powell dating back to at least February, according to multiple anonymous sources, who said Trump discussed the potential Powell ouster with former Fed Governor Kevin Warsh, who Trump would seek as a replacement, though Warsh advised against a firing.
“If I ask him to, he’ll be out of there,” Trump said about Powell at a Thursday afternoon press conference from the White House. “I’m not happy with him. I let him know it, and if I want him out, he’ll be out of there real fast, believe me,” Trump continued.
Trump actually tapped Powell to the Fed chief role in 2017, but he quickly soured on Powell, as Bloomberg reported Trump talked about firing him in December 2018; following that report, Trump said in a statement posted to then Treasury Secretary Steven Mnuchin’s social media he “never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.”
Despite Trump’s own words then, his actions during his second presidential term indicate a more aggressive interpretation of who he has the authority to fire, sparking questions over whether he will ultimately sack Powell as he did both Democratic commissioners of the Federal Trade Commission last month as well as members of the National Labor Relations Board and the Merit Systems Protection Board.
The firings challenge the 1935 Humphrey’s Executor decision from the Supreme Court, finding the president cannot fire leaders of independent federal agencies over policy disagreements, and the Supreme Court may hear an appeal from the ousted FTC officials this summer.
News Peg
Treasury Secretary Scott Bessent has told Trump firing Powell risks upending financial markets, two unnamed sources told Politico. “If Chairman Powell can be fired by the president of the United States, it will crash markets in the United States,” Sen. Elizabeth Warren, D-Mass., told CNBC’s “Squawk on the Street” on Thursday. Warren previously served as chair of the Senate’s banking subcommittee on economic policy.
Powell Has Pushed Back
Powell addressed concerns about what a new legal precedent on federal commissioner firings would mean in a Wednesday appearance at the Economic Club of Chicago, saying he’s not sure if those court decisions “will apply to the Fed, but I don’t know” and the Fed’s independence from outside influence is “very widely understood and supported in Washington and in Congress where it really matters.”
Why Is Trump After Powell?
Trump’s issues with Powell stem from his vehement disagreement with Powell’s more cautious monetary policy stance. Powell is “always TOO LATE AND WRONG” and he “should have lowered Interest Rates…long ago,” Trump wrote Thursday. Trump’s reported discussions about firing Powell in 2018 came as the Fed raised rates. Interest rate cuts tend to be politically popular as they make borrowing costs from mortgages to small business loans less expensive, though the Fed has kept rates at a historically elevated level over the past three years to rein in inflation.
Can The President Have A Say In Setting Rates?
There’s nothing prohibiting a president from expressing their opinion on monetary policy, and several presidents have made direct comments on what they believe the Fed should do, though perhaps none as brazen as Trump. In August, Trump said he believes the “president should have at least say” in setting rates. “I think that in my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman,” Trump said. In his 1981 State of the Union address, President Ronald Reagan called for the Fed to tighten the money supply, but added he “fully recognize[d] the independence of the Federal Reserve System and will do nothing to interfere with or undermine that independence.”
Crucial Quote
“I don’t think the court has yet been provided with a coherent rationale for a way in which it could overrule Humphrey’s Executor without also undermining the independence of the Fed, and thereby risking yet further harm to the stability of our economic system,” Stephen Vladeck, Georgetown University Law Center professor, told SCOTUSblog last week.
What To Watch For
How Trump will handle the appointment of Powell’s successor. Bessent said Monday the White House will begin interviewing candidates this fall. Bessent told Forbes in November of his idea of tapping a shadow Fed chair, saying letting “everyone know who the Fed chair is going to be…enhances the credibility of the Fed.” Powell said in December such an arrangement is not “on the table at all,” adding: “There’s got to be trust and mutual respect and acknowledgement of the different authorities and boundaries that we have.”
Further Reading
