(Reuters) – President Donald Trump on Monday kept up his verbal assault on Federal Reserve Chair Jerome Powell over the Fed’s refusal for now to further cut interest rates, rattling financial markets growing ever more fearful that Trump may ultimately try to fire the U.S. central bank chief over the matter.
Whether Trump has the authority to do so is unclear.
The Federal Reserve Act of 1913 establishing the Fed stipulates that members of its Board of Governors, appointed by the president and confirmed by the Senate to staggered 14-year terms, can be only be removed for “cause” – long thought to mean misconduct, not policy disagreement.
That said, the law omits reference to limits on removal from its description of the four-year term of the Fed chair, who is one of the seven governors.
There is no direct legal precedent, since no president has ever tried to fire a Fed chief. There are, however, lawsuits now working their way through the courts over unrelated firings by Trump being watched as possible proxies for whether he has that power. One is currently pending before the Supreme Court, where any attempt to fire Powell would almost certainly end up.
A lot would hinge on just how Trump might choose to “fire” the Fed chief.
As each of his predecessors has done, Powell holds three roles – chair of the Federal Reserve System, member of the Board of Governors and chair of the Fed’s interest-rate-setting Federal Open Market Committee.
Were Trump to try to remove Powell only as chair of the Fed system, Powell could remain a governor until that term expires at the end of January 2028. The next scheduled board vacancy does not occur until January 2026, which in the meantime would leave Trump only the option of nominating one of the other incumbent governors to be chair. Two of those other six were appointed by Trump in his first term – governors Christopher Waller and Michelle Bowman, whom Trump recently nominated as vice chair for bank oversight. Both, like Powell, have spoken about the importance of Fed independence, so it’s not clear that either immediately would deliver the rate cuts Trump wants.
Trump has no direct control over who heads the FOMC. The FOMC chair is chosen annually by the panel’s 12 members – the seven governors, the president of the Federal Reserve Bank of New York and four of the other regional bank presidents, who serve on the panel on a rotating basis.
