Donald Trump appointed Federal Reserve Chair Jerome Powell. Can he fire him?

President Donald Trump is sending mixed messages about whether he would fire Federal Reserve Chair Jerome Powell. 

Trump said July 16 he is "not planning on doing anything" when asked if he would fire Powell. However, he also said he doesn't "rule out anything," and mentioned a renovation project with ballooning costs.

"I think it’s highly unlikely unless he has to leave for fraud," Trump said July 16. "And it’s possible there’s fraud involved with the $2.5, $2.7 billion renovation. This is a renovation, how do you spend $2.7 billion? And he didn’t have proper clearance."

The Federal Reserve has been undergoing building renovations since 2021 on a project that the board that controls the Fed first approved in 2017. The project’s cost of $2.5 billion is about $600 million above the original budget, according to The Associated Press.

The cost has increased because of design changes, increasing labor and material costs and "unforeseen conditions," such as "more asbestos than anticipated," the Fed said in an FAQ.

But Trump’s administration seems to be using the renovation as a possible reason to oust Powell. Russ Vought, director of the Office of Management and Budget, sent Powell a July 10 letter saying the project is "out of compliance with the approved plan" and "in violation of" the National Capital Planning Act, which outlines how agencies can make changes to federal buildings.  

Trump’s feud with Powell isn’t new. For months, the president has criticized Powell, whom he appointed the role in 2017, for refusing to drop interest rates. The Fed raised interest rates in 2022 and 2023 during former President Joe Biden’s administration as a response to inflation.

Since Trump entered the White House in January he has told Powell to resign and threatened to fire him. 

"If I want him out, he’ll be out of there real fast, believe me," Trump said in April. "I’m not happy with him."

In November, after the 2024 election, reporters asked Powell if he would step down or whether he thought Trump had the authority to fire him. 

"Not permitted under the law," Powell said.

Trump spoke to a group of Republican lawmakers July 15 about firing the chair, several news organizations reported. Trump showed lawmakers a draft letter firing Powell, The New York Times reported. 

Trump denied having written a letter. 

"No, I talked about the concept of firing him. I said, ‘What do you think?’ Almost every one of them said I should," Trump said. "But I’m more conservative than they are."

While Trump attributed his reticence to fire Powell to his "conservatism," the bigger impediment is a question of legality. Here’s why. 

The sculpture of an eagle looks out from behind protective construction wrapping on the facade as the Federal Reserve Board Building undergoes both interior and exterior renovations, in Washington, Oct. 23, 2023. (AP)

What is the role of the Federal Reserve, who appoints its chair?

The Federal Reserve is the country's central bank. Its responsibilities include setting interest rates and supervising and regulating banks. It was created in 1913 as part of the Federal Reserve Act and is run by an independent board of governors. The seven governors that make up the board are nominated by the president and confirmed by the Senate. The president selects the chair and two vice chairs from among the seven, according to the Congressional Research Service.

While talking to reporters, Trump appeared to overlook that he was the person who nominated Powell to be the chair in 2017: "I’m surprised he was appointed," Trump said. "I was surprised, frankly, that Biden put him in and extended him."

In 2021, Biden nominated him for a second four-year term which is set to end in May 2026. After that, Powell can remain on the board of governors until January 2028.

Can the president fire the Federal Reserve chair?

Unlike other government agencies, the Fed has a lot of independence from Congress and the White House, the Congressional Research Service said in a January report.

According to the report, economists have justified the independence saying that decisions about monetary policy shouldn’t be influenced by political pressures. To ensure Fed accountability, the chair testifies before Congress, much like other government agencies.

The Fed chair can be removed "for cause by the President," according to the law. This refers to "inefficiency, neglect of duty, or malfeasance in office," according to a Supreme Court decision about the Federal Trade Commission.

In May, the Supreme Court ruled on Trump's authority to fire members of two different independent agencies. In its 6-3 ruling, the Court granted the Trump administration’s emergency request to fire the heads of the agencies while the case over the legality of firing them played out in the courts.

In its opinion, the Supreme Court addressed the Fed saying its ruling didn’t affect the agency.

"The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States," the Supreme Court said.

Some legal experts question the legality of Trump firing Powell. Any move to oust him would likely end up in the courts.

Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania said the Fed’s building renovation costs aren’t "cause" for Powell’s dismissal.

"There is no factual basis to support any conclusion that the cost overruns on the renovation project constitute anything like fraud or gross negligence," Conti-Brown said. "Had Powell committed fraud, in this context for any other, there could well be a case for his removal."

Conti-Brown said that Trump has long talked about wanting Powell’s removal. A court may consider Trump citing the renovation’s budget as "pretext" for his firing — a legal term used to describe a false reason an employer gives for firing an employee in order to cover the real reason, Conti-Brown said.

"Courts evaluating any attempted removal after the fact will assess both the animus and pretext very heavily against President Trump," Conti-Brown said.

However, it’s unclear how courts would react because "this is uncharted legal territory," Jeremy Kress, a former Fed banking regulator who is a faculty director of the University of Michigan’s Center on Finance, Law and Policy told The New York Times. 

Lev Menand, a legal scholar at Columbia University, agreed with Kress.

"In normal times, I would say Powell wins 10 times out of 10," Menand told The New York Times. "But these aren’t normal times, because this court has shown that it is willing to look the other way when the president engages in illegal conduct and it is willing to construe the president’s power under the Constitution as so broad as to allow the president to flout laws."