President Donald Trump reportedly drafted a letter firing Federal Reserve Chair Jerome Powell and polled a group of Republican lawmakers Tuesday night about whether he should oust the bank chief, according to media reports. Asked about it Wednesday, Trump denied that he plans to fire Powell, whose term ends in 2026, but left wiggle room for him to remove the Fed chief if circumstances change.
“We’re not planning on doing anything,” Trump told reporters in the White House during a meeting with the crown prince of Bahrain, adding, “I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud.”
Trump has railed against the Fed chief — at times hurling personal insults — for the bank’s delay in further cutting interest rates as officials await clearer data on how the president’s aggressive tariffs are affecting inflation. Most economists expect to see upward pressure on prices as Trump’s historically high tariffs take effect, and yesterday’s inflation report for June showed what could be the first signs of the import taxes pushing prices higher for some goods.
Trump admitted that he discussed firing Powell with lawmakers Tuesday night, though he denied drafting a letter. “I talked to them about the concept of firing him,” Trump said. “I said, ‘What do you think?’ Almost all of them said I should.” Trump claimed that he is “too conservative” to take their advice.
Still, Trump has talked about possibly firing Powell for months, despite legal protections, historic norms and market fears that could make doing so problematic. Trump said Wednesday that he was surprised that Powell had been named as Fed chief — although Trump is the one who appointed him in late 2017, before President Joe Biden reappointed him in 2021. “He’s a terrible Fed chair. I was surprised he was appointed,” Trump said. “I was surprised, frankly, that Biden put him in and extended him.”
Raising the pressure: The White House appears to be exploring a new avenue for possibly firing Powell, who can be removed for cause from the otherwise largely independent institution. Trump has recently accused the Fed chief of mismanaging the renovation of some of the central bank’s facilities in Washington, including its roughly 90-year-old headquarters, the Marriner S. Eccles Federal Reserve Board Building.
Office of Management and Budget Director Russell Vought sent a letter to Powell last week saying that Trump is concerned about the issue. “The president is extremely troubled by your management of the Federal Reserve system,” Vought wrote. “Instead of attempting to right the Fed's fiscal ship, you have plowed ahead with an ostentatious overhaul of your Washington DC headquarters.”
Costs for the renovation, which began during the first Trump administration, have ballooned to $2.5 billion, about $700 million more than initial estimates. Fed officials say their headquarters building needs a complete overhaul, including all of its major systems. Asbestos removal has proven to be costlier than first estimated, and labor and materials costs jumped during the pandemic.
Powell has defended the work as both necessary and prudent, and attempted to refute the accusation that the building renovation is excessively luxurious. “There’s no VIP dining room,” Powell told lawmakers last month. “There’s no new marble. ... There are no special elevators. There are no new water features. ... And there’s no roof terrace gardens.” Powell has also asked an inspector general to review the project.
Nevertheless, Trump said on Tuesday that the renovation could provide grounds to dismiss Powell. “I think it sort of is,” Trump said. “When you spend $2.5 billion on, really, a renovation, I think it’s really disgraceful.”
Senators caution: Sen. Thom Tillis, a Republican from North Carolina who sits on the Banking Committee that oversees the Fed, defended the independence of the Fed and urged Trump not to fire Powell.
“There’s been some talk about potentially firing the Fed chair,” Tillis said on the Senate floor on Wednesday afternoon. “The consequences of firing a Fed chair, just because political people don’t agree with that economic decision, will be to undermine the credibility of the United States going forward, and I would argue if it happens, you are going to see a pretty immediate response, and we’ve got to avoid that.”
Republican Sen. John Kennedy of Louisiana specified that potential response: "If you fire the chairman of the Federal Reserve, you will see the stock market crash and you will see the bond market crash.”
In a research note, Greg Valliere, chief U.S. policy strategist at AGF Investments, explained why the markets would react so badly. “Trump wants lower interest rates,” he wrote, per CNN. “He thinks ousting Powell will make a difference, but most market analysts think it would send a signal that the Fed has lost its independence.”