President Donald Trump’s plan to fire Federal Reserve Chair Jerome Powell could lead to a contentious courtroom battle that may reach the Supreme Court. If Trump proceeds with his intention, Powell would likely sue, and the case would head to court.
The issue of whether Trump has the authority to remove Powell as Fed chair is unclear. However, given the precedent set by the Supreme Court in Trump v. Wilcox, it appears unlikely that Trump could dismiss Powell without a valid reason, or “cause.”
If Powell were fired, he could potentially remain on the Federal Open Market Committee (FOMC) and continue to influence monetary policy. The FOMC chair has historically been the Fed board chair, but this is not a requirement.
Trump’s motives for firing Powell are unclear. Some speculate that it might be a ploy to create pressure for rate cuts or set up Powell as a scapegoat in case of an economic downturn.
Experts warn that attempting to fire Powell could have significant market and economic implications. Even if the FOMC were to cut rates, it could do more harm than good to Trump’s goal of lowering finance costs on the national debt. The market may react negatively to any perceived politicization of monetary policy.
A recent Supreme Court ruling has established that the Fed is a unique entity with insulation from removal for political or policy reasons. This means that any attempt by Trump to fire Powell would likely face significant legal challenges and could lead to a prolonged and costly lawsuit.
Despite the low chances of success, attempting to fire Powell could serve a political purpose for Trump. However, it also carries risks that may not be worth the cost.
Source: https://www.cnbc.com/2025/07/19/unraveling-the-legal-economic-and-market-ramifications-if-trump-tries-to-fire-fed-chair-powell.html