Trump threatens to fire Powell. Can he really do it?

According to Zhitong Finance APP, U.S. President Donald Trump continued to verbally attack Federal Reserve Chairman Jerome Powell on Monday, citing the Fed's current refusal to further cut interest rates. This statement has triggered turmoil in the financial markets, with investors increasingly concerned that Trump may ultimately attempt to remove the Fed chairman.

So, can Trump fire Powell?

It is unclear whether Trump has the authority to do so.

The Federal Reserve Act, established in 1913, stipulates that members of the Federal Reserve Board, who are appointed by the president and confirmed by the Senate for a term of 14 years, can only be removed for "cause"—which has long been interpreted to mean misconduct rather than policy disagreements.

That said, the law does not mention removal restrictions when describing the four-year term of the Fed chairman (one of the seven governors).

Would this be an unprecedented situation?

There is currently no direct legal precedent, as no president has ever attempted to fire a Fed chairman. However, there are some lawsuits regarding Trump's firing of other unrelated federal committee and agency members currently in court, which are seen as potential references to determine whether Trump has such power. One of these cases is currently pending in the Supreme Court, and any attempt to fire Powell would almost certainly end up being reviewed by the Supreme Court.

What would firing Powell mean in practical terms?

This largely depends on how Trump chooses to "fire" the Fed chairman.

Like his predecessors, Powell holds three roles—Chairman of the Federal Reserve System, a board member, and Chairman of the Federal Open Market Committee (FOMC) that sets interest rates.

Removing only the Fed chairman position:

If Trump attempts to remove Powell only from the position of Chairman of the Federal Reserve System, Powell could continue to serve as a board member until the end of his term in late January 2028. The next scheduled vacancy on the board will not occur until January 2026, during which time Trump can only nominate another current board member to serve as chairman. Two of the six other governors were appointed by Trump during his first term—Christopher Waller and Michelle Bowman, whom Trump recently nominated as Vice Chair for Bank Supervision. Like Powell, both have spoken about the importance of Fed independence, so it is unclear whether either of them would immediately lower interest rates according to Trump's wishes.

Removing the FOMC chairman position:

Trump has no direct control over who serves as the FOMC chairman. The committee's chairman is elected annually by its 12 members—seven governors, the president of the New York Fed, and four of the regional Fed presidents who rotate on the committee.

Traditionally, the FOMC selects the Fed chairman to serve as chairman, with the New York Fed president serving as vice chairman. However, theoretically, they could choose any member, including Powell if he remains a governor.

Removing the governor position:

Removing Powell from the governor position would have the most significant impact. If this move withstands legal challenges, Trump would simultaneously have a vacancy on the board and a chairman vacancy to fill with his chosen nominee. This would also open the door for Trump to dismiss other governors at will, allowing him to establish a broader Fed leadership that he believes aligns with his wishes Can Powell challenge this?

If this happens, Powell is eligible to challenge his dismissal in federal court, but he must fund this action with personal resources. As a lawyer and former private equity head, he has personal wealth to finance such an action.

Powell has repeatedly stated that he believes he cannot be removed under the law, and he recently indicated that he thinks the ongoing court cases regarding Trump's dismissal of other independent federal commission and agency members do not apply to the Federal Reserve.

Will this really happen?

Reports last week indicated that Trump has discussed firing Powell and replacing him with Kevin Warsh, who served as a Federal Reserve governor from 2006 to 2011. The report stated that Warsh advised against this, arguing that Trump should allow Powell to remain until the end of his term as Federal Reserve Chair in May 2026.

Also last week, White House economic advisor Kevin Hassett was seen as a potential replacement for Powell, stating that this matter is being studied internally by the government