President Donald Trump has once again locked horns with Federal Reserve Chair Jerome Powell — this time over a controversial renovation project. Over the past few weeks, Trump publicly reignited his long-running criticism of Powell, threatening to fire him while accusing him of mismanagement, a $2.5 billion renovation plan for the Fed’s historic headquarters has sparked the latest conflict.
Trump called the cost “excessive,” claimed Powell “needed a palace,” and questioned whether it alone warranted dismissal. Behind the scenes, Trump reportedly drafted a termination letter and sought Republican support to remove Powell. The threat has rattled financial markets and triggered sharp warnings from lawmakers about the Fed’s independence and economic stability.
Trump Mulls Firing Powell
In a closed-door meeting, Trump asked GOP lawmakers if he should go ahead and dismiss Powell, he even pointed to a draft termination letter. Media reports suggest those present supported the idea, encouraging Trump, though he later walked back talk of an immediate firing, Trump confirmed he had raised the issue with lawmakers. In public, he called Powell “terrible” and mocked him, likening conversations with him to “talking to a chair.” However, he told reporters it was “highly unlikely” he would remove Powell—unless there was fraud.
Renovation Costs Spark Outrage
The trigger for the renewed attack was the Fed’s renovation project. Initially estimated at $1.9 billion in 2023, the cost ballooned to $2.5 billion. The Fed cited design changes, oversight consultations, and unexpected asbestos levels. Powell defended the project before Congress on June 25, Trump’s allies, however, pounced. FHFA head Bill Pulte called Powell’s testimony “deceptive,” without evidence. OMB director Russell Vought accused Powell of mismanagement and labelled the project an “ostentatious overhaul”, Trump also replaced three members of the federal oversight body — all seen as loyalists — raising concerns about politicization.
Can Trump Legally Remove Powell?
Legally, the issue remains murky. The Federal Reserve Act allows the president to remove Fed governors “for cause.” But courts have interpreted this to mean misconduct or inefficiency. While Powell also serves on the Board of Governors, the Supreme Court recently suggested the Fed’s structure shields it from executive interference. This legal uncertainty makes removal complicated, especially in the absence of proven wrongdoing.
Markets React to Removal Talk
Markets did not take Trump’s comments lightly. On July 16, the US Dollar Index dropped by 0.8% as investors feared instability. Though the decline narrowed after Trump’s clarification, Republican senators issued warnings. Sen. John Kennedy said firing Powell would “crash the stock and bond markets.” Sen. Thom Tillis called the move a “colossal mistake” and warned of long-term consequences. They stressed that Powell’s removal would not change policy outcomes but would shatter confidence in Fed independence.
Powell’s Term and Trump’s Influence
Powell’s term as chair runs until May 2026. His governor term extends to 2028. Trump cannot directly remove him from the Fed entirely without cause. But he can shape the board through appointments. In January 2026, Adriana Kugler’s term ends, giving Trump another chance to shift the balance. Trump has already appointed a new vice chair for supervision. However, 12 of the 19 members of the Fed’s policy committee come from regional banks and remain outside presidential control.
Past Presidents Also Pressured the Fed
Presidential pressure on the Fed isn’t new, in the 1960s, LBJ summoned Fed Chair Martin to demand looser policy. Nixon pressed Arthur Burns in the ’70s to keep rates low — moves many blames for future inflation. Trump clashed with Powell before, especially over interest rates during his earlier term. Still, Powell has made clear he would not resign if asked.
Conclusion
Trump’s feud with Powell has resurfaced at a sensitive moment, with inflation easing and interest rate debates intensifying, talk of removing the Fed chair unsettles global markets. While the president may not have the legal standing to fire Powell outright, his campaign of pressure and political appointments could erode the Fed’s independence — with real risks for economic stability.
