President Donald Trump has now threatened to fire Federal Reserve Chairman Jerome Powell if he doesn’t step aside when his term ends in mid-May, setting the stage for a legal battle as the nomination of Powell’s successor is in limbo.
The escalation came Wednesday morning when the president said he planned to fire Powell if he tried to stay on as acting chairman beyond the end of his term, if his replacement has not been confirmed.
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“Then I’ll have to fire him, OK?” Trump said on Fox Business in response to a question about Powell refusing to step aside. “If he’s not leaving on time — I’ve held back firing him. I’ve wanted to fire him, but I hate to be controversial. I want to be uncontroversial.”
The situation
Powell’s term is set to expire on May 15. But the confirmation of his replacement, former Fed Governor Kevin Warsh, is in question. That is because Sen. Thom Tillis (R-NC), a member of the Senate banking committee, has vowed to block Trump’s Fed nominees until the Justice Department concludes its investigation into Powell. That’s despite Tillis praising Warsh as a nominee.
Powell’s term as chairman of the Fed’s Board of Governors ends on May 15. He has said that he would continue serving as chairman beyond the end of his term if his successor is not confirmed and that doing so would be consistent with precedent.
Even if Trump succeeded in firing him as chairman of the Board of Governors, though, he may not be able to fire him from the monetary policy committee that sets interest rates. That’s because Powell’s term as a Fed governor goes into 2028. And the committee, the Federal Open Market Committee, chooses its chairman by vote.
“Which in the past has always been the same chair acting as chair, until a new one is confirmed,” Jai Kedia, an economist at the Cato Institute, told the Washington Examiner.
Traditionally, the Fed is insulated from White House pressure. Trump, though, has tried hard to sway the central bank’s monetary policy.
Earlier this year, in an astonishing video statement, Powell disclosed that he was being investigated by the Justice Department for claims he made during congressional testimony about the Fed headquarters renovation. He has said the inquiry is an effort by Trump to influence interest rate policy.
During the Fox Business interview released on Wednesday, Trump emphasized that the inquiry was designed to look into cost overruns at the Fed buildings.
The buildings at the center of the renovation, the Eccles Building and 1951 Constitution Avenue, had an estimated budget of $1.9 billion in 2023, but by 2025, those costs had ballooned to $2.5 billion. Both are located near the National Mall in Washington.
In light of the investigation, Powell has said he intends to remain on the board until the Justice Department investigation into him has ended.
“I have no intention of leaving the board until the investigation is well and truly over with transparency and finality,” Powell told reporters at a recent news conference.
Traditionally, Fed chairs retire from the board after their term as chairman is up, allowing the president to fill the vacancy. Powell’s situation is unusual, though, given the investigation.
Powell said he still has not made up his mind about whether he will remain on the board after the investigation ends.
“I will make that decision based on what I think is best for the institution and for the people we serve,” the chairman said.
What’s next
All of this could be over and Warsh potentially confirmed to sit in on the June Fed meeting if the Trump administration dropped the inquiry.
But as of Wednesday, Trump appeared dug in and said he didn’t plan to drop the investigation into Powell, saying that he wanted to learn more about the renovations for the Fed headquarters.
“I have to find out,” Trump said.
And even if Trump attempts to fire Powell, it would likely end up tied up in the courts.
Trump has already attempted to fire Lisa Cook, who is a member of the central bank’s board of governors.
Cook, 61, stands accused by Federal Housing Finance Agency Director Bill Pulte of mortgage fraud, which led Trump to attempt to fire her. Cook successfully sued for a temporary restraining order blocking the move and has participated in Fed meetings since that time.
Powell attended oral arguments before the Supreme Court in the Cook matter.
“His capacity to fire Federal Reserve officials, I think, is yet to be determined — very much in question,” Stephen Kates, a financial analyst at Bankrate, told the Washington Examiner.
Still, some think that the administration will end up relenting and give up the investigation so that Tillis will drop his blockade and allow Warsh to become chairman.
“I think it’s mostly bluster,” Ryan Young, senior economist at the Competitive Enterprise Institute, told the Washington Examiner. “I think it goes back to Trump’s old strategy that he learned from his mentor Roy Cohn: never admit when you got something wrong.”
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There is an incentive for Trump to drop the investigation as well, because he thinks that the Fed will start lowering interest rates once Warsh is confirmed and is in charge of the Fed board.
“When Kevin gets in, I do,” Trump said during the Fox Business interview when asked whether he thinks rates will go down later this year.
