Donald Trump vs. The Fed: Firing Rumors Rock Markets, Dollar Tumbles

United States: Donald Trump, putting a full stop to all rumors, said currently he does not plan to fire Federal Reserve Chair Jerome Powell, but did not rule it out entirely, intensifying an already dramatic standoff over U.S. interest rate policy and central bank independence.

A Bloomberg report earlier in the day claimed Trump was preparing to oust Powell, triggering a drop in stocks and the U.S. dollar, while Treasury yields surged. Trump later denied the report but admitted he had discussed the idea with Republican lawmakers.

“I don't rule out anything, but I think it’s highly unlikely unless he has to leave for fraud,” Trump told reporters, referring to allegations — unsupported by evidence — of cost overruns in the Fed’s $2.5 billion headquarters renovation.

Powell, first nominated by Trump in 2017 and reappointed by President Biden, has said he intends to serve out his term, which runs until May 2026. Legal precedent and a recent Supreme Court ruling protect Fed chairs from being removed over policy disagreements—they can only be fired "for cause."

Despite that, Trump renewed his attack, calling Powell a “terrible” chair for keeping rates between 4.25%–4.50%, despite rising inflation pressures tied to Trump’s own “Big Beautiful Bill” a tax and spending law critics say is driving up the U.S. deficit.

Backlash from Republicans

Senator Thom Tillis (R-NC), a member of the Senate Banking Committee, sharply warned against undermining the Fed’s independence:

“The consequences of firing a Fed chair just because political people don’t agree will be to undermine the credibility of the U.S.”

House Financial Services Chair French Hill also downplayed the risk, saying, “President Trump and his Treasury Secretary know he cannot fire Powell.”

Renovation Controversy: A Smokescreen?
Last week, the White House hinted at grounds for dismissal when it criticized the Fed's HQ renovation costs. Powell responded by inviting the central bank’s inspector general to review the project, calling out false claims about VIP elevators and dining rooms.

Senator Elizabeth Warren called it a political ploy.

“Nobody is fooled by Trump and Republicans' sudden concern about building renovations—it’s a clear pretext to fire Powell,” she posted on X.

What’s Next?

While Trump’s team has begun quietly exploring Powell’s possible replacements—including Treasury Secretary Scott Bessent, economist Kevin Hassett, and Fed Governors Kevin Warsh and Christopher Waller—analysts warn that continued pressure could backfire.

JP Morgan’s chief U.S. economist, Michael Feroli, said Trump’s threats may spike inflation expectations, push long-term rates higher, and increase government borrowing costs — the very thing Trump blames Powell for.

In short, the showdown between Trump and Powell isn’t over. And the stakes for U.S. markets, inflation, and global confidence are only rising.

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