#TrumpVsPowell #TrumpVsPowell Here’s a detailed analysis of the situation regarding President Trump’s consideration of firing Federal Reserve Chair Jerome Powell, based on the latest reports:
Key Developments
1. Active Consideration by Trump Administration
- White House economic adviser Kevin Hassett confirmed on April 18, 2025, that President Trump and his team are "continuing to study" whether they can legally fire Fed Chair Jerome Powell. This signals that the option remains on the table despite significant legal and market implications .
- Trump escalated his criticism of Powell this week, accusing him of "playing politics" by not cutting interest rates and claiming he could remove Powell "real fast" if desired .
2. Legal Uncertainty and Precedents
- The Federal Reserve Act states that Fed Board members, including the chair, can only be removed "for cause" (e.g., misconduct or neglect of duty), not policy disagreements. Powell has repeatedly asserted that Trump lacks the authority to fire him over monetary policy differences .
- A pending Supreme Court case (*Humphrey’s Executor v. United States*) could challenge this precedent. The Trump administration has signaled it may seek to overturn the 1935 ruling, which limits presidential power to dismiss heads of independent agencies .
3. Economic and Market Risks
- Firing Powell could destabilize markets, already rattled by Trump’s tariff policies. Economists warn it would threaten the Fed’s independence, potentially triggering stagflation (high inflation + stagnant growth) and eroding global confidence in the U.S. economy .
- Treasury Secretary Scott Bessent and other advisors have reportedly cautioned Trump against the move, citing risks to financial stability .
4. Powell’s Stance and Fed’s Position
- Powell insists he will serve his full term (until May 2026) and has dismissed Trump’s threats, stating the law protects his position. He emphasized the Fed’s independence is "widely supported in Congress" .
- The Fed has held interest rates steady (4.25%-4.50%) since December 2024, citing uncertainty from Trump’s tariffs, which Powell warned could spike inflation and slow growth .
5. Political Context
- Trump’s feud with Powell dates to his first term, when he blamed the Fed for rate hikes. The conflict reignited as Powell criticized Trump’s tariffs for creating economic "uncharted waters" .
- Potential replacements, like former Fed Governor Kevin Warsh, have advised against firing Powell, but Trump’s allies are reportedly vetting candidates .
What Happens Next?
- Legal Battle Likely: If Trump attempts to fire Powell, a court challenge would ensue, potentially reaching the Supreme Court. Powell could remain in place during litigation .
- Congressional Role: Bipartisan support for Fed independence may lead Congress to clarify removal protections in the Federal Reserve Act .
- Market Volatility: Any overt move against Powell could trigger sharp market reactions, compounding existing tariff-related stresses .