Can Trump fire Powell? How the President can and can’t sway the fed

President Donald Trump is again raising questions about whether he will seek to limit the Federal Reserve's independence, as new tensions flare in his contentious relationship with the central bank.

In his second term as president, Trump has questioned the Fed's decision making, calling on the central bank to lower interest rates — reviving a refrain from his first stint in the White House. On April 17, he said Fed Chair Jerome Powell's "termination cannot come fast enough."

Trump has previously said he would allow Powell, whom he had discussed firing in 2018, to serve out his term but wouldn't reappoint him as the central bank's chief. Powell has said he wouldn't resign if asked by Trump.

What a President Can and Can't Do to the Fed

Removing the Fed Chair

The most direct way of sending a message to the Fed would be to remove its chair, as Trump discussed doing in 2018 when he was angry with Powell over a series of interest-rate hikes. 

A president can't dismiss a Fed chair easily, legal scholars say. Section 10 of the Federal Reserve Act says members of the Fed's Board of Governors, of which the chair is one, can be "removed for cause by the president." Legal scholars have generally interpreted "cause" to mean serious misconduct or abuse of power. 

Whether a president can strip a governor of the chairmanship is more ambiguous because the law doesn't explicitly provide the "for cause" protection for that role, said Peter Conti-Brown, a professor and Fed historian at the Wharton School of the University of Pennsylvania. Regardless, because of the "for cause" protections for governors, stripping a Fed chair of that title might mean the individual could remain on the board. It also might not remove such an individual from another powerful perch: head of the Federal Open Market Committee, or FOMC, the policymaking group that sets interest rates. Its members, not the president, choose who leads it.

At the same time, the Trump administration is involved in legal fights that could erode the protections of Fed governors. Those cases involve the president's power to fire members of US agencies that operate with more independence from the White House than cabinet departments. The cases are testing the bounds of a 1935 Supreme Court decision known as Humphrey's Executor, which let Congress give members of independent agencies job protections to shield them from dismissal except for neglect or malfeasance. After the Supreme Court issued that decision, Congress passed the legislation creating the Fed's modern structure and insulating Fed governors from removal, except for cause.

Conservative legal scholars have long viewed Humphrey's Executor as handing too much freedom to regulators; Project 2025, an extensive plan for reshaping the US government led by conservative thinkers, called it "ripe for revisiting." A senior official at the Justice Department has said the Trump administration will no longer defend the Humphrey's Executor precedent and would push the Supreme Court to reverse it.

Appointing Fed Officials

The President's clearest power over the Fed is through naming appointees to fill vacancies on the Board of Governors and appointing them to key positions, including chair, on that body. Governors fill 14-year terms and Fed chairs serve four-year terms. All sit on the rate-setting FOMC.

Powell succeeded Janet Yellen, who served as treasury secretary under President Joe Biden, in 2018. In appointing him, Trump broke from recent historical precedent in which new presidents reappoint the chair chosen by their predecessor. Biden reappointed Powell in 2021.

Powell's term as chair is set to expire in 2026, while his 14-year term as a governor is scheduled to end in 2028. That presents Trump with one of two scheduled opportunities to name appointees to the Fed board. Another is set to come in January 2026, when Fed Governor Adriana Kugler's term expires.

But those positions represent a small slice of the Fed's 19 policymakers — all the Fed governors and the presidents of the 12 regional Federal Reserve banks. The regional presidents are selected not by the president, but by directors of the individual banks, subject to the approval of the Fed's Board of Governors.

Still, Trump has had the opportunity to nominate a new vice chair for supervision — an important role in banking regulation. On March 17, he announced Fed Governor Michelle Bowman as his pick for the role. The position became open after Fed Governor Michael Barr stepped down from the post, in part because of speculation that Trump would seek to 

remove him from the job.

A president's appointees to Fed governor, chair and vice-chair positions must receive Senate confirmation, a process that serves as a check on the selections. Trump's Republican Party won control of the Senate in the Nov. 5 election, but it also held a majority in the body during his previous presidency from 2017 to 2021, when pushback from lawmakers doomed some of his Fed picks.

Pressure Campaigns

Presidents of both parties have tried to influence the Fed by applying pressure both publicly and privately. Historically, presidents have aired complaints in person, perhaps even with some physical intimidation — Lyndon Johnson summoned Fed Chairman William McChesney Martin Jr. to his Texas ranch in 1965 to berate him for raising borrowing costs. President Richard Nixon in the 1970s famously applied pressure on then-Fed Chair Arthur Burns, which some economists believe led the central bank to refrain from taking forceful steps to rein in inflation at the time. During his first presidential term, Trump publicly lambasted the Fed and Powell when he disagreed with their interest-rate decisions.

In the first week of his second term, Trump said he understood interest rates "much better" than the Fed's leaders and that he expected them to listen to his views. He said that if he disagreed with them, "I will let it be known."

He did just that after the Fed decided to hold interest rates steady in late January, saying the central bank had "failed to stop the problem they created with Inflation."

He added that the Fed had done "a terrible job" on banking regulation and followed up with an executive order Feb. 18 that requires the bank's Board of Governors to submit to the White House for review any rule changes related to supervision of financial institutions. This was part of a broader effort seeking greater presidential oversight of independent federal agencies, although there was a specific exemption for the Fed's monetary policy activities.

Trump again criticized the Fed for keeping rates unchanged in mid-March amid growing concern that increased tariffs on US imports would stoke inflation. He posted on his social media platform Truth Social, "The Fed would be MUCH better off CUTTING RATES."

Trump's mid-April remark came a day after the chair said that the Fed wasn't in a rush to cut rates. He said Powell should have lowered rates "long ago, but he should certainly lower them now."

Elon Musk, the billionaire Trump has tasked with slashing federal spending and waste, has also targeted the Fed, which he's called "absurdly overstaffed."

Musk's brainchild, the Department of Government Efficiency, or DOGE, has set up shop at several federal agencies and has been instrumental in cutting government staffers and demanding employees submit emails accounting for their recent work.

The Federal Reserve Act, however, says the Fed's Board of Governors "shall determine and prescribe the manner in which its obligations shall be incurred."

Scott Alvarez, a former Fed general counsel, said the law gives the central bank the authority to hire and fire its employees, who are not a part of the civil-service system. 

The Fed by law owns its own buildings, which do not belong to the General Services Administration the way many other federal properties do, Alvarez said. 

The Fed generally has control over who enters its buildings and usually makes access decisions as appropriate based on its internal policies, he added.

Unlike many parts of the federal government, the US central bank doesn't receive funding through the congressional budgetary process. Its income derives from its own operations — primarily from the interest on government securities that it has acquired through open market operations.

The Biden administration largely refrained from speaking publicly about the central bank's policy. For their part, Democratic members of Congress have spoken out more directly. Senator Elizabeth Warren of Massachusetts, for instance, had publicly called on the central bank to lower interest rates before it did so in September.

The Inevitability of Politics

Powell has repeatedly emphasized that the Fed aims to be apolitical and consider only what's best for the economy as it sets policy. When asked at an event in May 2024 about the Fed's independence in relation to the executive branch, Powell said "without question." He also said lawmakers on both sides of the aisle support the central bank's independence.

But the Fed is widely understood to operate in a political context. Fed leaders work closely with the Treasury Department, and spend time networking with Capitol Hill lawmakers. The Fed's decisions have to take into account the economic impact of decisions by both the president and Congress, such as tax cuts or large spending plans.

Conti-Brown, the Fed historian, said the central bank's financial regulation decisions can sometimes factor in feedback from various political factions. "The Federal Reserve is a deeply political institution," Conti-Brown said. But "politics and partisanship are quite different."

Why Central Banks Want Independence

In general, politicians like lower interest rates because making money cheaper helps people buy more things right now, boosting economic growth. To supporters of modern central banks, independence from political pressure is what lets banks take necessary but sometimes unpopular steps, like raising interest rates to fight inflation. 

The argument for independence is that the economy will benefit more in the long run if investors and consumers believe that the central bank will do whatever is needed without fear of political consequences.

Trump's treasury secretary, Scott Bessent, said in April that the Fed's independence in setting monetary policy was a "jewel box that has got to be preserved."

— With assistance from Greg Stohr

​Amara Omeokwe is an American journalist currently reporting for Bloomberg News, where she covers the Federal Reserve and the U.S. economy.

This article first appeared on Bloomberg and is published by a special syndication arrangement.