Can Donald Trump Fire Federal Reserve Chair Jerome Powell? Legal barriers, economic fears explained

Can the US President sack the Federal Reserve chief? The institution that has remained independent since its inception and has worked without succumbing to the pressure of the chief executive of the state, may be trying to find an answer to the pertinent question. Constitutional experts and political pundits got confused after Donald Trump threatened Fed chief Jerome Powell to fire him over his statement on tariffs. 

What did Donald Trump say about Jerome Powell?

Taking to the social media platform Truth Social, Trump wrote in a post, "Powell’s termination cannot come fast enough!" Ahead of the post, the US President told journalists in the Oval Office, "If I want him out, he’ll be out of there real fast, believe me."

Donald Trump was angry, apparently because speaking at the Economic Club of Chicago on Wednesday, Powell said the Fed will base its decisions solely on what’s best for Americans. He said, "That’s the only thing we’re ever going to do. We’re never going to be influenced by any political pressure… Our independence is a matter of law."

What did Federal Reserve chief say?

Powell also said that Federal Reserve governors are "not removable except for cause" and that "we serve very long terms, seemingly endless terms."  However, the President lambasted the Federal Reserve chief by declaring that he was not doing his work. He claimed that Powell cut interest rates “too late.” 

Jerome Powell was first nominated to lead the Fed by Trump in 2017 and renominated by President Joe Biden in 2022. His current term as chair extends until May 2026.

Can US President fire Fed Chief?

Though the Federal Reserve Act allows for the dismissal of Board members, including the chair, "for cause", no Fed chair has ever been removed by a President. This cause has been interpreted as misconduct and not the policy. Sarah Binder, an expert on the Federal Reserve and a senior fellow at the Brookings Institution, told Time magazine, "The court would typically not see disagreements over interest rates settings as ‘for-cause.’”

Will Powell quit?

Powell himself has made it clear that he would not go quietly. Asked in November if he would resign if Trump asked him to, he gave a curt, “No.” However, the Trump Administration has started the groundwork for a potential confrontation. Treasury Secretary Scott Bessent recently told Bloomberg that he expects to begin interviewing possible replacements for Powell in the fall.

The issue has come at a time when the Supreme Court is weighing a case involving the President’s power to fire senior officials at independent agencies. While the case involves the National Labour Relations Board and the Merit Systems Protection Board, the implications could ripple wider. If the court approves the Trump administration's decision, it may be interpreted as a signal of how it might resolve a legal clash over Trump's desire to get rid of Powell. 

Humphrey’s Executor v. United States case

Besides Humphrey’s Executor v. United States, a 1935 Supreme Court ruling states in the most unambiguous terms that it limited the president’s ability to remove leaders of independent agencies without cause. The ruling has long shielded Federal Reserve chairs from political dismissal. Now, it could soon be tested by a conservative Supreme Court.