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President Donald Trump has stated that it is “highly unlikely” he will remove Jerome Powell from his position as head of the U.S. central bank, just hours after reportedly inquiring with lawmakers about the possibility of dismissing him.
Stock markets and the dollar experienced a brief downturn following reports that Trump had raised the issue with Republicans on Tuesday, but subsequently rebounded after the president downplayed the discussions.
The dismissal of a Federal Reserve chair would represent a significant departure from established precedent.
Trump has repeatedly urged Powell to lower U.S. interest rates, engaging in a series of highly critical remarks, which continued on Wednesday when he referred to Powell as a “knucklehead” and asserted that he was “doing a lousy job.”
Speaking at the White House, the president acknowledged that he had revisited discussions about firing Powell—whom Trump nominated for the role during his first term—but stated that he was “not planning on doing anything.”
When pressed on whether he was ruling out the idea entirely, he responded: “It’s highly unlikely unless he has to leave for fraud.”
The president’s allies have joined in the criticism of Powell, accusing the central bank leader of mismanaging the renovation of Federal Reserve properties.
Last week, budget director Russell Vought called for an investigation into cost overruns on a $2 billion project to renovate Fed buildings in Washington. Trump commented earlier this week that he considered it “sort of” a fireable offense.
Analysts at Deutsche Bank have suggested that the recent shift in the focus of attacks indicates that the administration is building a case against Powell.
“Whether or not the president chooses to act on this case is an open question,” they wrote, adding that recent developments “suggest that the risk has risen.”
The Federal Reserve was established by Congress and possesses the authority to set policy independently of the White House.
Powell’s second term as Fed chair is set to conclude in May of next year, but he has the option to remain as a governor of the central bank until 2028.
Under federal law, the president has the power to remove Fed governors before the end of their terms “for cause,” a phrase that typically implies serious misconduct.
Powell has consistently affirmed his intention to serve out his term as chair, disputing the notion that Trump has the authority to terminate his position over a policy disagreement.
The Fed has also responded to the criticism surrounding the renovations, updating its website to address some of the accusations.
It has stated that the renovations will ultimately lead to cost reductions by enabling the consolidation of operations and attributed the increase in expenses to “unforeseen conditions,” such as a greater-than-anticipated presence of asbestos.
Trump has previously considered the possibility of firing Powell since his first term, when he voiced objections to the Fed’s raising of interest rates. He has repeatedly refrained from pursuing the plan due to investor concerns, including most recently this spring.
However, on Tuesday, Anna Paulina Luna, a Republican congresswoman from Florida, posted on social media that the firing was “imminent.” This followed posts by other Trump allies in recent weeks suggesting that Powell might be stepping down or calling for his dismissal.
A senior White House official confirmed to the BBC that Trump had indicated to Republicans that Powell’s firing could occur soon.
The White House’s increasingly assertive stance against one of the most important independent institutions globally is introducing a new dimension to a fragile global financial system, which is already grappling with the effects of Trump’s trade wars.
The U.S. economy is experiencing a slowdown and facing challenges stemming from the president’s sweeping tariffs, which economists have cautioned could contribute to inflation.
As head of the Fed, Powell plays a critical role in determining the level of interest rates set by the U.S. central bank, a decision that has implications for borrowing costs throughout the economy.
The key interest rate is currently hovering around 4.3%, a decrease from last year’s levels.
However, the Fed has not reduced it as quickly as other central banks, such as the European Central Bank and the Bank of England—a point that Trump has emphasized.
The president is among those advocating for a rate reduction to make borrowing more accessible and stimulate economic growth.
Powell has stated that the bank, which is tasked with maintaining price stability, should proceed with caution given concerns that tariffs could lead to increased prices.
Many economists and investors have warned that political interference in the leadership of the Fed could undermine price stability and erode investor confidence.
Speaking to analysts earlier this week, the head of America’s largest bank cautioned that the Fed’s independence was “absolutely critical.”
Jamie Dimon, chief executive of JP Morgan Chase, stated: “Playing around with the Fed can often have adverse consequences, the absolute opposite of what you might be hoping for.”
Treasury Secretary Scott Bessent indicated earlier this week that a “formal process” was underway to identify a replacement for Powell. He characterized Trump’s criticism of Powell as “working the refs,” alluding to efforts to exert pressure on referees in sports games.
Trump has mentioned Bessent as a potential candidate. Other individuals under consideration include Kevin Hassett, who currently leads Trump’s National Economic Council, and conservative economist Kevin Warsh.
Powell was nominated to lead the Fed by Trump in 2017, succeeding Barack Obama’s appointee, Janet Yellen.
Former President Joe Biden extended his term in 2021.
A court in Brazil also bars the ex-president from using social media and puts him under 24-hour surveillance.
The lawsuit is over a story claiming the president wrote a “bawdy” personal note to Jeffrey Epstein in 2003.
A subset of Trump supporters are passionate about the case – and angry at the president.
Some 250 Venezuelans deported from the US to El Salvador were exchanged for 10 Americans held by Caracas.
It now heads to President Trump’s desk to be signed into law. “THIS IS BIG!!!”, he said after it passed.
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