President Trump has been thinking about firing Federal Reserve Chair Jerome Powell for some time. But who would replace him, if it happens?
The favorite, according to people close to the administration, is former Fed governor Kevin Warsh, who served as former Fed Chair Ben Bernanke’s liaison to Wall Street during the chaos of the 2008 financial crisis.
More recently, Warsh has been clear about his view that the Fed is playing politics — an opinion often echoed by Trump.
In a January op-ed in the Wall Street Journal published just before Trump took office, Warsh predicted the Fed would try to blame high inflation on Trump and said he believes that any inflationary effect of tariff policies will likely be of smaller magnitude than the disinflationary influence of deregulation and spending cuts.
“In my time as a governor at the Fed, we would look through one-off price changes,” he said, a view of how the central bank should act on tariffs that was echoed recently by Treasury Secretary Scott Bessent.
Kevin Warsh, at the Sohn Investment Conference in New York City, in 2017. REUTERS/Brendan McDermid ·REUTERS / Reuters
Trump spoke to Warsh in February and March about replacing Powell, according to the Wall Street Journal, but Warsh advised the president against any such action until Powell’s term is up in May 2026.
It is still unclear whether Trump, who wants Powell to lower interest rates, will act. He has been unhappy with Powell’s performance for some time, according to people close to the administration, and feels the central bank boss was too late in responding to high inflation during President Biden’s term.
Steve Moore, a longtime adviser to Trump, said that every time he goes to see the president, Trump complains to him that one of his mistakes was nominating Powell to be Fed chair.
The chances he could remove Powell, Moore said, are a little less than 50-50, but he maintains the president should have the ability to remove him.
Moore said it was foolish for Powell to make the comments he made last Wednesday, when the Fed chair said the central bank will “wait for greater clarity” before considering any interest rate adjustments and warned Trump’s tariffs would likely generate “higher inflation and slower growth.”
“To even pretend he’s politically independent is outrageous,” Moore said. “It was a completely partisan rant.”
U.S. President Donald Trump looks on as his nominee for the chairman of the Federal Reserve Jerome Powell takes to the podium during a press event in the Rose Garden at the White House in 2017. (Photo by Drew Angerer/Getty Images) ·Drew Angerer via Getty Images
Other names that could be in the mix below Warsh, according to Moore, include National Economic Council Director Kevin Hassett, Reagan-era economist Art Laffer, and economist and TV anchor Larry Kudlow, who was the NEC director during the first Trump term.
Hassett on Friday, when asked by a reporter if removing Powell was an option, said, “The president and his team will continue to study that.”
One official who has reportedly advised Trump not to remove Powell early is Treasury Secretary Bessent, who said last week the administration will start interviewing candidates to succeed Powell “sometime in the fall.” He also said that Fed “monetary policy is a jewel box that’s got to be preserved.”
Another possible Powell successor who surfaces among those close to the administration is Fed Governor Chris Waller, who was appointed during Trump’s first term.
Waller’s views may be more to President Trump’s liking. In a recent speech, Waller said he believes the central bank may need to cut interest rates to prevent a recession, predicting that economic growth could “slow to a crawl” if tariffs remain high.
He predicted that inflation could surge this year to nearly 5%, and the reason to ease monetary policy even in that scenario is that a surge in tariff-related inflation could in fact be “temporary,” which would allow Waller to “look through it.”
The Fed governor anticipates that the impact on growth and employment could be longer-lasting.
Federal Reserve Governor Christopher Waller in 2024. REUTERS/Brendan McDermid/File Photo ·Reuters / Reuters
“I can hear the howls already that this must be a mistake given what happened in 2021 and 2022,” he noted last week while delivering a speech in St. Louis, referring to a period when policymakers wrongly predicted that inflation during the COVID-19 pandemic would turn out to be transitory.
“But just because it didn’t work out once does not mean you should never think that way again.”
Whether a removal of Powell could survive a legal challenge is another unknown question.
The law states that each member of the Fed board shall hold office for 14 years “unless sooner removed for cause by the President.” The statute doesn’t have any language that specifically addresses the Fed chairman.
The question is what exactly constitutes “for cause.” The language in the law is plainly more restrictive than for Cabinet officials and other members of a presidential administration, who are often described as working “at the pleasure” of the president.
TD Cowen analyst Jaret Seiberg said he thinks the president appears to be moving closer to justifying removal of Democrats on the Federal Reserve board.
He said the president’s recent decision to fire the two Democrats at the National Credit Union Administration “tells me that Team Trump believes it has absolute authority to keep Democrats off the boards of the financial regulators even if Congress made those boards bipartisan.”
Trump told reporters last week in the Oval Office that he has the authority to remove Powell, who was actually appointed by Trump back in 2018.
“If I want him out, he’ll be out of there real fast, believe me.”
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