Washington, D.C. — President Donald Trump privately expressed a desire to remove Federal Reserve Chair Jerome Powell before his term ends in May 2026, citing dissatisfaction with the Fed’s renovation expenditures and rate policies. The revelation, followed by Trump’s public walk-back, sent tremors through financial markets and sparked renewed concern over the independence of the US central bank.
According to The New York Times, Trump drafted a letter and told Republican lawmakers that he intended to dismiss Powell, claiming the Fed’s $2.5 billion renovation of its Washington headquarters was “cause” for removal under the Federal Reserve Act. However, legal experts within his own circle reportedly warned that such a move would likely be deemed unlawful.
Hours later, Trump clarified during remarks covered by CNBC that he had no immediate plans to act. “I’m not planning on doing anything at this moment,” he said, adding, “That doesn’t mean I’m happy with him.”
Market backlash and economic ripples
The initial reports of Trump’s intent to fire Powell ignited swift volatility in U.S. markets. As detailed in The Wall Street Journal’s real-time coverage, the Dow Jones Industrial Average dropped 0.8% in early trading, while the S&P 500 fell by 0.4%, with tech and financial stocks leading the decline.
The bond market also reacted, with yields moving modestly higher. While exact figures were not cited in market summaries, analysts pointed to investor concerns over the Fed’s credibility as a driver of short-term volatility. While official commodity data was not immediately available, some analysts speculated that gold and other Observers noted a brief flight to perceived safe-haven assets, though no confirmed data was available on gold prices or currency movements at the time of reporting.
Shares of Morgan Stanley, Bank of America, and JPMorgan Chase saw declines, while NVDA premarket prices dipped as tech traders anticipated heightened uncertainty over interest rates and inflation policy.
Can the president fire the Fed Chair?
The Federal Reserve Act allows the president to remove the Fed Chair “for cause,” a term legal scholars say is meant to address misconduct or neglect, not policy disagreements. White House lawyers warned that citing renovation costs would likely not satisfy this standard.
This position is echoed by experts across the legal spectrum. Todd Phillips, a Georgetown University professor specializing in financial regulation, noted that “wasteful spending alone doesn’t meet the legal threshold.” He added that any such dismissal would face near-certain legal challenge and could provoke a constitutional standoff.
Historical precedent supports this assessment. No president has ever removed a Fed Chair for political reasons, and past attempts, such as Trump’s own floated plan to fire Powell in 2019, were abandoned under legal and market pressure.
Shadow Fed politics
Some observers believe Trump’s recent comments are part of a strategic effort to undermine Powell’s authority ahead of the 2026 reappointment decision. Trump advisers have begun floating possible replacements including former economic adviser Kevin Hassett, former Fed governor Kevin Warsh, and current board member Christopher Waller.
The approach, described by some analysts as a “shadow succession plan,” could allow Trump to influence Fed policy without initiating a formal dismissal. “Floating a list of successors is a way to exert political pressure without risking a court battle,” said Mark Zandi, chief economist at Moody’s.
The renovation as political cover
At the heart of Trump’s rationale is the $2.5 billion modernization of the Fed’s headquarters on Constitution Avenue—a project that includes seismic upgrades, HVAC improvements, and expanded IT infrastructure. While the cost has drawn criticism from fiscal hawks, Fed officials insist the investment is necessary to ensure operational security.
Trump has referred to the renovation as “wasteful” and “excessive,” suggesting it reflects poorly on Powell’s leadership. However, While Powell has not addressed the renovation controversy, institutional experts note that the Fed Chair does not oversee day-to-day contracting decisions, which are typically handled by administrative staff and budget officers.
Legal scholars argue that even if the spending was excessive, it would not constitute “cause” under federal law—further weakening the legal foundation for dismissal.
Global reaction and institutional defense
The global financial community responded quickly to the news. European Central Bank President Christine Lagarde warned that “central bank independence must be preserved at all costs,” cautioning that political interference threatens credibility in global financial systems.
Domestically, JPMorgan Chase CEO Jamie Dimon voiced concern, stating that even the perception of political manipulation could destabilize markets. “Markets don’t just want low interest rates. They want certainty and trust in the Fed’s independence,” Dimon said.
Powell’s silence and the road ahead
As of Wednesday evening, Jerome Powell had made no public statements regarding the matter. The Federal Reserve declined to comment, citing the hypothetical nature of the discussions. Powell is expected to speak following the next Fed meeting scheduled later this month.
For now, the chair remains in place, shielded by legal precedent and a widespread belief across global markets that the central bank must remain free from political coercion. Yet the threat lingers, and with an election approaching and inflation still a concern, Powell’s position may face renewed scrutiny in the months to come.
