President Donald Trump has seen his relationship with Federal Reserve Chairman, Jerome Powell, significantly deteriorate to the point of considering his early dismissal.
According to The Wall Street Journal, Trump privately discussed the possibility of removing Powell for months, even raising the idea with Kevin Warsh, former governor of the FED and potential replacement.
Warsh, however, reportedly advised against taking that step, recommending that Trump allow Powell to complete his term, which ends in May 2026.
Powell's removal faces significant legal obstacles, as the Federal Reserve Act of 1913 states that board members can only be removed "for cause," meaning for misconduct, not political disagreements. When previously asked if he would resign if Trump requested it, Powell was clear: "No."
The tension between Trump and the Federal Reserve coincides with a key case before the Supreme Court, where the scope of presidential power over independent agencies, such as the National Labor Relations Board (NLRB) and the Merit Systems Protection Board (MSPB), is being evaluated.
In that case, Trump has argued that presidents should have the ability to fire the heads of these agencies without restrictions from Congress or judicial intervention.
This dispute could have significant implications for the institutional interdependence of the FED, as plaintiffs warn that a Trump victory would open the door for him to also remove Powell.
However, the Trump administration has denied that the case is directly related to the Federal Reserve, emphasizing that this institution has a "unique structure" with special legal protection derived from its history.
The Supreme Court has already demonstrated in recent decisions a greater willingness to limit the independence of agencies. In 2020, the justices removed the removal protection of the director of the Consumer Financial Protection Bureau (CFPB), arguing that this figure concentrated too much power without oversight.
