Trump not yielding to Federal Chairman Powell's expectations
The latest interest rate decision by the Federal Reserve was made despite pressure from U.S. President Donald Trump, but the legal barriers to removing Fed Chair Jerome Powell are high.
Under federal law, the President can only remove the Fed Chair "for cause," which means there must be a legitimate legal reason such as misconduct or incapacity. Mere disagreement with policy or performance is insufficient.
This legal protection is tied to the structure of the Federal Reserve Board of Governors, of which the Chair is a member appointed by the President and confirmed by the Senate, but protected from arbitrary dismissal. This restriction is largely untested but is supported by legal experts.
Trump's repeated public criticism and calls for Powell to be removed or for the Fed Board to "assume control" do not bypass this legal barrier. He cannot simply order Powell’s dismissal without cause, even if some Fed governors dissented from Powell’s policies and sided with Trump.
Two members of the Federal Reserve Board, Michelle Bowman and Christopher Waller, have advocated for a rate cut, but it is not specified that any other members supported this stance in the recent meeting.
Dissenting votes are rare at the Fed, making the advocacy by Bowman and Waller noteworthy. However, Trump's attacks on Powell are focused on urging a rate cut, and it seems he may be gambling on the effect of board members deviating from the majority's stance in the next meeting.
Despite Trump's pressure, Powell's term ends next May, and his demands for a rate cut have been unsuccessful as the Fed maintains interest rates between 4.25% and 4.5%.
The tensions between the Fed and Trump over interest rate decisions continue, with Trump referring to Powell as a "stubborn fool" and demanding that the Federal Reserve Board "TAKE CONTROL."
It is rumored that Christopher Waller has ties to Trump, with Trump reportedly considering him as a potential successor to Powell. However, the article does not mention any new observations suggesting that more board members may deviate from the majority's stance in the next meeting due to Trump's pressure.
Such attempts to remove or undermine the Chair without proper cause could lead to serious financial market disruption and institutional damage, given the Fed’s independence and the markets’ trust in its leadership. Public and expert consensus indicates Trump lacks the legal grounds for removal, and his criticisms remain political rather than legal imperatives for removal.
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