🚨 #TRUMP vs Powell: Clash in the Fed Spotlight
Trump's challenge to Fed Chair Jerome Powell isn’t just political—it’s rattling the markets.
Draft firing letter in play: Trump reportedly showed GOP lawmakers a draft termination letter during a private Oval Office meeting, asking for feedback on firing Powell for not lowering interest rates or over the $2.5B Fed HQ renovation cost overruns .
Public pivot: He later stated it’s “highly unlikely” he’ll fire Powell unless there's fraud involved .
Can the President Fire the Fed Chair?
Factor Summary
Legal constraints Supreme Court recently reaffirmed that the president can’t remove Powell over policy disputes; dismissal is only possible “for cause” .
Historical precedent No prior president has attempted to dismiss a sitting Fed Chair. Past Supreme Court rulings (e.g., Humphrey’s Executor, 1935) protect this role .
Current context Trump’s team is probing renovation cost overruns for potential “fraud” grounds .
Market Reaction & Risks
Initial jitter: Markets dipped and Treasury yields rose following reports of Trump’s firing consideration, but rebounded after his denial .
Investor unease: Traders are now pricing in expectations of Fed rate cuts starting in September, yet remaining cautious due to the political drama .
Wider economic risk: Analysts and Senate Republicans warn that replacing Powell could threaten the Fed's independence, undermining inflation control and market credibility .
What to Watch
1. Watch markets around any renewed threats or legal actions.
2. Follow developments in the renovation cost review—could become the official basis for any "for cause" argument.
3. Monitor any signals from the Supreme Court or legal framework that might alter presidential power over Fed governance.
Bottom Line
Trump's threats, though softened, have stirred market volatility and spotlighted the fragility of Fed independence. Removing Powell would likely face legal challenges and risk long-term economic trust.
