Trump vs Powell: Can the US President really afford to fire the Federal Reserve Chairman?

Dubai: Investors were briefly shaken after President Donald Trump once again dangled the idea of firing Federal Reserve Chair Jerome Powell — a move that’s legally murky and economically risky, but politically tempting.

Trump, known for pressuring the US central bank to keep interest rates low, told reporters he had discussed firing Powell, calling a $2.5 billion Fed building renovation “fraud” and “wasteful.” But moments later, he softened his stance: “I don’t rule out anything, but I think it’s highly unlikely.”

The comment capped a chaotic 24-hour period during which Trump was reported to have shown Republican lawmakers a draft dismissal letter for Powell. Markets tumbled. The dollar dropped.

Investors feared the worst: a direct assault on the independence of the world’s most influential central bank. But as quickly as the panic started, it eased. Trump’s walk-back calmed markets — for now.

Technically, firing a Fed Chair isn’t straightforward. The President can’t simply remove Powell because he disagrees with monetary policy. Legally, the Chair can only be ousted “for cause” — and vague allegations around office renovations may not meet that bar.

What’s more, a removal would trigger global market chaos, potentially raise inflation, hurt jobs, and tank confidence in US institutions. For a returning Trump aiming to supercharge the economy ahead of the 2024 election, that’s a dangerous game.

Trump’s frustration is no secret. He wants the Fed to cut interest rates fast, which could boost loans, real estate, stock markets. But Powell has held off, citing uncertainty from global trade tensions and inflationary pressures that still linger from past spending sprees and tariffs.

The Fed's job isn’t to make politicians happy — it's to balance jobs and inflation. Slashing rates prematurely could weaken the dollar and reignite price surges just as consumers are catching their breath.

Powell’s current term as Chair ends in May 2026, though his position as a Fed governor continues until 2028. Trump could choose not to renew Powell’s leadership role, appoint someone more aligned with his economic vision — and avoid the legal and political firestorm of a mid-term firing.

Reports suggest names like Kevin Hassett, Kevin Warsh, and even Treasury Secretary Scott Bessent are in the mix to succeed him — all viewed as “low-interest” loyalists.

While Powell may have survived another round of Trumpian fire, the standoff is far from over. The ongoing feud over the Fed’s renovation budget, and whispers of potential fraud investigations, signal more political theatre ahead.

The reality? Trump likely won’t fire Powell now — not because he doesn’t want to, but because he can’t afford the fallout. For now, it’s Powell’s move… but Trump is keeping his powder dry.