Trump Denies Reports That He Is Set to Fire Fed Chair Powell

Key Takeaways

• President Donald Trump denied reports he plans to fire Federal Reserve Chair Jerome Powell imminently.
• Trump has demanded the Fed cut borrowing costs, but Powell and other officials have resisted because they are concerned Trump's tariff campaign could push up prices and stoke inflation.
• Trump left the door open to dismiss the top banker over cost overruns in a renovation project at the Fed's headquarters.
• The legality of Trump's ability to fire Powell is disputed since the Fed is an independent agency outside the White House's direct control.
• Experts say the president's firing of the Fed chair could undermine the central bank's independence and hurt its ability to manage inflation.

President Donald Trump denied he was planning to fire Federal Reserve Chair Jerome Powell Wednesday, contradicting reports earlier in the day.

Trump said he had no plans to fire Powell around midday Wednesday. Just before he made his comments, The New York Times reported that Trump drafted a letter to fire Powell and showed it to lawmakers Tuesday night. Rep. Anna Paulina Luna, a Republican from Florida, posted on social media Tuesday night that Powell's firing was "imminent."

Trump has often criticized Powell and demanded that the central bank lower interest rates, sometimes threatening to fire him. Powell's term expires in May 2026, at which point Trump can appoint a successor.

"He's doing a lousy job, but no, I'm not talking about that," Trump told reporters in the Oval Office Wednesday when asked if he was planning to fire Powell. "Fortunately, we get to make a change in the next, what, eight months?"

He also denied having written a letter.

Whether Trump could fire Trump if he tried is a matter of legal dispute. The Fed is independent of the White House, and Powell has said the president has no authority to fire him. In May, the Supreme Court gave some credence to that in a ruling about presidential authority to fire the heads of independent agencies.

Trump did not entirely rule out firing Powell, saying he could fire him because of cost overruns in an ongoing renovation of the Fed's Washington headquarters.

Trump Turns Up Pressure To Cut Rates

Economists and many members of Congress have supported the Fed's independence, citing the historical record of countries with independent central banks versus those under the control of a chief executive. According to academic studies, politically controlled central banks do a worse job of stabilizing inflation, leading to economic trouble.

The Federal Open Market Committee, led by Powell, has held interest rates at a higher-than-usual level this year in an effort to push inflation down to the Fed's goal of a 2% annual rate. The federal funds rate, which influences interest rates on all kinds of loans, is high enough to be "modestly restricive" on economic activity, in Powell's words.

Powell and other Fed officials have voiced concerns that Trump's trade policies will push up consumer prices, dealing a setback to the Fed's war on inflation.

Trump has insisted Powell should significantly lower rates. That would cut borrowing costs, boost the economy, and potentially reduce the government's interest payments on the national debt. Trump has said Powell is "too late" in cutting rates and has lobbed insults at the Fed chair, noting that the European Central Bank has steadily cut rates throughout the year as the Fed has held steady.

Financial markets were pricing in the likelihood that the Fed would wait until at least September before cutting rates according to the CME Group's FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

Trump said he would appoint a successor to Powell who favored low interest rates.

Stocks dipped Wednesday after the initial reports and recovered after Trump's denial.

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