Can Trump Fire Fed Chair Jerome Powell? Inside the White House vs. Fed

Fed governors, including the chair of the central bank, are protected by statute.

According to the Federal Reserve Act, a board member can only be removed “for cause.” Courts have traditionally interpreted “cause” to mean serious misconduct or legal wrongdoing, not simply policy disagreements.

Trump and his advisers have reportedly explored whether they could dismiss Powell under this clause. However, the Wall Street Journal reported in an exclusive that senior White House officials, including Secretary of the Treasury Scott Bessent and Secretary of Commerce Howard Lutnick, have warned the president that such a move would likely spark legal battles, spook markets and ultimately fail to deliver the interest rate cuts he desires.

Lutnick also reportedly told the president that efforts to fire the Fed chair likely would not lead to any practical change on interest rates due to board members aligning their policymaking approaches with Powell.

In an April 22 press conference, Trump appeared to walk back his earlier threats: “I have no intention of firing Powell. This is a perfect time to lower interest rates. If he doesn’t, is it the end? No. It’s not.”

The last major challenge to Fed independence occurred in the 1970s.

Oval Office recordings revealed at a later date that President Richard Nixon had pressured then-Fed Chair Arthur Burns to ease monetary policy ahead of the 1972 election. Burns acquiesced.

The result: short-term economic growth followed by years of painful inflation that ultimately required the draconian measures of Fed Chair Paul Volcker in the early 1980s to correct.

While the Fed’s independence isn’t ironclad in the Constitution, a broad bipartisan consensus has emerged over the past several decades to shield the institution from political interference.

Legal experts, including economist Tim Mahedy, argue that removing a Fed chair for policy decisions would set a dangerous precedent and invite a “systemic financial event.”

There’s also ongoing litigation that could influence the issue.

The Department of Justice is attempting to overturn a 90 year old legal precedent that protects independent agency officials like Powell from being dismissed without cause. While the effort isn’t directly about the Fed, it has raised alarms among those who see it as a potential erosion of institutional safeguards.