The Federal Reserve is facing a crisis of independence as President Trump attempts to fire chair Jerome Powell over the cost of a $2.5 billion renovation project. The move would mark a significant escalation in the president’s feud with the Fed, which has been a key target of his economic agenda.
Powell has consistently refused to cut interest rates to benefit the Trump administration, citing concerns about inflation and the labor market. However, the White House is using the high cost of the renovation project as leverage to pressure Powell into action.
The issue is rooted in the Federal Reserve Act, which gives the Board of Governors independent authority over its real estate precisely to insulate it from political pressure. The Trump administration’s discontent with Powell’s stance on interest rates has led to increased scrutiny of the Fed’s renovation project.
If Trump succeeds in firing Powell, it would set up a legal battle that could have long-term consequences for how U.S. economic policy is run. The case would likely end up before the Supreme Court, raising questions about the limits of presidential power over the central bank.
Experts argue that the Fed’s current target interest rate is still in territory considered “restrictive” by officials, deliberately slowing down economic activity to try to bring down inflation. While some argue that the $2.5 billion project is a waste of taxpayer money, others see it as a necessary investment to modernize the Fed’s historic buildings.
The stakes are high, with the Trump administration pushing for a 3-percentage-point rate cut that would put the Fed in ultra-stimulative mode at a time when unemployment is low and inflation remains elevated. The outcome will determine whether the U.S. sticks to its tradition of handing control over the money supply to technocrats or gives in to presidential demands.
As the situation unfolds, it remains to be seen how far the Court would be willing to go to insulate the Fed if Powell were charged with “neglect of duty.” The case is a reminder that the Fed’s independence is not absolute and that there are limits to presidential power over the central bank.
Source: https://www.axios.com/2025/07/16/trump-powell-fed-rates-renovations