• Trump escalates verbal assault on Fed Chair Powell over interest rate cuts.
• Legal ambiguity surrounds Trump's authority to fire Powell as Fed Chair.
• Removal could reshape Federal Reserve leadership and impact financial markets.

President Donald Trump has intensified his rhetoric against Federal Reserve Chair Jerome Powell, primarily due to Powell's refusal to implement further interest rate cuts, raising fears in financial markets about the possibility of Trump attempting to fire him. The Federal Reserve Act of 1913 specifies that members of the Fed's Board of Governors can only be removed for "cause," traditionally understood as serious misconduct rather than mere policy disagreements. However, the act does not clearly outline the removal process for the four-year term of the Fed chair, which complicates Trump's potential actions against Powell, as no president has attempted to fire a Fed head before, leading to legal uncertainties about such a decision, according to Reuters, South China Morning Post, and India Times.

The nuances of Trump's options highlight the legal ambiguity surrounding his authority to act against Powell. If Trump were to remove Powell solely as the Fed's chair, Powell could retain his role as a governor until his term expires at the end of January 2028. This avenue would restrict Trump to nominating one of the current governors to take over as chair, a choice complicated by the existing governance on the Board of Governors that favors Fed independence, as emphasized by other members notably appointed by Trump, like Christopher Waller and Michelle Bowman, according to Reuters and India Times.

Trump's lack of authority over the Federal Open Market Committee (FOMC), the body responsible for setting interest rates, further complicates his potential moves. Normally, the FOMC selects its chair, but theoretically, they could choose to promote any member, including Powell if he remains a governor after a potential removal as chair. However, reports suggest Trump had discussed replacing Powell with former Fed governor Kevin Warsh, who reportedly advised against that action and suggested that Powell be allowed to finish his term, which ends in May 2026, according to South China Morning Post and India Times.

If Trump were to attempt to fire Powell outright as a governor, it would likely encounter significant legal challenges, as Powell has expressed confidence that his position is protected under the law. Should such a removal happen, Powell would be well positioned to challenge it in federal court, potentially using his personal wealth to fund the legal battle. As the situation unfolds, the ongoing dynamics reflect the increasing tension regarding central bank independence in the face of political pressures, according to Reuters and India Times.