Can Trump remove Powell as Fed chair before his term ends?

President Donald Trump on Thursday lambasted Federal Reserve Board Chair Jerome H. Powell – saying his “termination cannot come fast enough” – after Powell said the administration’s trade war probably would cause a temporary increase in inflation.

Trump has repeatedly called for the Fed to lower interest rates and indicated he does not want Powell to keep his position. But can the president remove the Fed chair before his term ends in May 2026?

Powell, a former investment banker and lawyer, served in the Treasury Department during President George H.W. Bush’s presidency and replaced Janet L. Yellen as Fed chair in 2018, during Trump’s first term. He was reappointed by Biden in 2022.

In his first term, Trump speculated about firing Powell as the Fed planned for interest rate hikes and markets dipped on fears of a trade war with China. Since regaining the presidency, Trump has called on the Fed to lower interest rates, but Powell has resisted the White House’s pressure.

Can Trump remove Fed chair?

Despite Trump’s talk about removing Powell, the president’s advisers in his first term concluded he could not fire Powell without cause.

The Federal Reserve, which regulates financial institutions and sets monetary policy, is an independent body and is meant to make decisions about the long-term health of the economy without political interference. In his Chicago speech, Powell said “our independence is a matter of law.” He noted that officials serve long terms and that Fed independence has broad support among Republicans and Democrats alike.

But a federal court recently gave Trump a partial win in his efforts to remove the leaders of two other independent agencies, including the National Labor Relations Board. The Supreme Court is considering whether to hear the case this spring.

Peter Conti-Brown, a financial regulation professor at the University of Pennsylvania’s Wharton School, said the court’s ruling is a significant development that makes Fed independence less clear.

“We had courts weigh in saying, ‘Yeah, the president does get to fire anybody he wants to,’ ” Conti-Brown said. “They didn’t address the Fed exactly … but the ambiguity now has increased dramatically relative to where we were six years ago.”

Still, some experts say it’s unlikely Trump would try to replace Powell early because such a drastic move probably would send markets into turmoil by undermining investors’ confidence that the central bank is making decisions based on long-term economic goals and not political expediency.

“This is the way that you totally and irrevocably debauch a currency and break your capital markets, your bond markets,” Conti-Brown said.

Trump might try to shape the central bank in other ways. Some bank executives and former Fed officials have said they expect Trump might try to demote another member of the central bank’s seven-member board.

Fed governors can be removed for cause, such as criminal activity or malfeasance, according to statute and court interpretations.

- – -

Does Trump have a replacement for Powell in mind?

Even if Powell serves out the rest of this term, the Trump administration will nominate a replacement eventually. Treasury Secretary Scott Bessent told Bloomberg TV on Monday that interviews for potential candidates will start in the fall.

“We think about it all the time,” Bessent said.