POTUS Trump needs Fed’s Jerome Powell, he just doesn’t know it yet

President Donald Trump’s public feud with Federal Reserve Chair Jerome Powell this week has told us one thing: the current administration has checked everything on its list, except borrowing rate cuts. 

Trump does not like Powell, he made that abundantly clear before his return to the White House earlier this year. Maybe, just maybe, he could rush the Fed chair out of the central bank. But does he have to? Not quite.

POTUS Trump delivered his remarks about Powell on Monday after a weekend of rising tension and a pause on the Good Friday holiday, a break that had temporarily shielded Wall Street from volatility. But once trading resumed, investors wasted no time running away from US equities.

According to Trump, the chair is “Mr. Too Late” and “a major loser” for failing to cut interest rates. Is all the name-calling warranted? 

On one hand, Trump believes he has done good by the markets, and it is Powell’s stubborn stance that is causing a bloodbath. On the other, Powell, making his case for no action using strong job and inflation markets, sees no reason to cut rates. And on that front, the latter could be right to pause rate cuts.

All major US stock indexes fell sharply on Monday, led by declines in the tech-heavy “Magnificent Seven” group of stocks. The dollar index weakened to a three-year low of 98.3, while gold surged to a record high of $3,490 per ounce. 

Speaking to reporters last Friday, Trump said that he would find ways to remove Powell before the end of his term in May 2026. A day later, White House economic adviser Kevin Hassett added that the administration would “continue to study” the possibility of replacing the Fed chair.

Powell’s job security is legally protected

Powell, whom Trump nominated to the top Fed position in 2017, is legally shielded from dismissal under the Federal Reserve Act of 1913. The law grants Board of Governors members 14-year terms and stipulates they can only be removed “for cause,” a standard understood to mean misconduct, not policy disagreements.

Yet, the statute is ambiguous regarding the four-year term of the Fed chair. It omits any explicit restrictions on removal, which begs the question of whether the US president could lawfully fire the chair. 

No president has ever attempted to do so, and legal observers say that any such move by Trump would almost certainly prompt a constitutional showdown, likely ending up before the US Supreme Court.

Most financial experts and political analysts believe the odds of Powell’s removal are relatively low to nought. Even in Congress, GOP leaders like Senate Banking Committee member Senator John Kennedy support Powell’s stay in office.

“I put the odds around zero,” one Wall Street strategist told reporters, arguing that even discussing Powell’s removal was already damaging enough. “Firing Powell would be a body slam to Treasuries and the dollar.”

According to market betting platform Polymarket, there is a 21% chance Powell could be out before year-end.

Risks of replacing Powell are more than the benefits

Some economic experts argue that the fallout from removing Powell would likely outweigh any short-term gains. Ending the Fed’s independence could start a lasting repricing of US assets. Stock valuations could fall, bond term premiums could rise, and inflation expectations could become more volatile, eroding investor confidence in American fiscal stewardship.

A hypothetical new chair, presumably well-aligned with Trump’s plea for rate cuts, will definitely support a looser monetary policy. However, the path to that policy shift goes through a market shock that could tip the US into an inevitable recession. 

“Recessions take all the fun out of low rates,” a financial columnist noted.

Even if Powell remained in place, the constant eye-poking, digging and bashing of the Fed’s authority might prove just as harmful.