If Donald Trump returns to the White House, Federal Reserve Chair Jerome Powell may not finish his term. Despite Powell’s tenure running through 2026, Trump has hinted at seeking a replacement, raising alarm among economists and investors who fear the move could undermine the Fed’s independence and rattle financial markets.
But here’s the twist: according to several legal scholars and former White House officials, Trump may have discovered a backdoor to remove Powell without sparking a constitutional crisis.
Why Trump Wants Powell Out
Trump’s dissatisfaction with Powell is nothing new. During his presidency, he frequently criticized the Fed chair for not slashing interest rates fast enough. His frustration intensified as Powell resisted political pressure, reinforcing the central bank’s independence.
More recently, Trump has blamed Powell’s policies for slowing economic momentum and raising borrowing costs, which could hamper a second-term agenda focused on tax cuts and trade renegotiations.
“He’s not my guy,” Trump said bluntly at a rally earlier this year. “We need someone who believes in growth, not recession.”
The Market Shock Risk
Jerome Powell is seen by investors as a pillar of stability. Removing him prematurely could shake confidence in U.S. monetary policy, trigger volatility in bond markets, and weaken the dollar.
“Firing Powell would be equivalent to setting off a flare gun in the bond market,” one former Fed economist told Millionaire MNL. “It’s not just about politics, it’s about trust in the system.”
Wall Street has already begun baking in uncertainty about Fed leadership into pricing models, especially if Trump wins in November. Several analysts have warned of a “mini taper tantrum” scenario, akin to 2013, if Powell is abruptly removed or sidelined.
The Workaround: Reassign, Not Fire
Legally, the president can’t fire the Fed Chair outright. The Federal Reserve Act protects board members from removal except for “cause.” However, Trump may pursue a more subtle maneuver: demoting Powell.
Legal experts note that while the law guarantees Powell a seat on the Fed Board, it does not guarantee his chairmanship. Trump could theoretically reassign Powell to a regular board governor role and appoint a new chair more aligned with his economic philosophy.
“It’s not technically a firing,” says a former Trump administration attorney. “But it would amount to a political gutting of Powell’s influence.”
Precedent – and the Political Cost
There is no precedent for reassigning a sitting Fed chair mid-term. Doing so would almost certainly face legal challenge and ignite political firestorms. But it may be just enough of a gray area for Trump to proceed without congressional approval.
The White House could cite “performance-related cause,” citing inflation missteps or over-tightening. Critics, however, argue such claims are thinly veiled political motivations that could harm the Fed’s apolitical standing for years to come.
Still, as Millionaire MNL has reported before, Trump thrives in legal ambiguity, and his base may welcome any move perceived as “draining the swamp,” even if it sends temporary tremors through Wall Street.
What’s Next?
If Trump wins in November, Fed watchers expect a months-long standoff. Powell could resign voluntarily to avoid public spectacl, or he could stay and challenge any demotion in court.
In either case, markets are bracing. Bond yields could spike. Equities could wobble. And global investors will closely watch for signs that the U.S. central bank remains insulated from presidential politics.
As one hedge fund manager noted, “This isn’t just about Powell. It’s about whether the Fed can stay independent in a new political era.”
