Everyone is talking about it. Again. The rumor mill is churning, and the question on every trader's lips from Wall Street to Main Street is: Is Trump firing Powell? Honestly, the relationship between President Donald Trump and Federal Reserve Chair Jerome Powell has been a car wreck in slow motion for years. We’ve seen the tweets—or the "Truths"—where Trump calls Powell a "moron," a "stubborn mule," and "Too Late Jerome." But this week, things took a turn that felt a little more "lawyerly" and a lot more serious.
On Wednesday, January 14, 2026, Trump told reporters he has "no plan" to fire Powell right now. Sounds like a relief, right? Not so fast. He immediately followed that up by saying we are in a "holding pattern" and that it was "too early" to say what he’d ultimately do.
Basically, it's the political equivalent of "we'll see."
The Investigation: A New Kind of Pressure
What’s different this time around is the DOJ. We aren't just talking about mean nicknames anymore. The Department of Justice has launched a criminal investigation into Powell. The focus? Alleged cost overruns and "misleading testimony" regarding a $2.5 billion renovation of the Fed’s headquarters in Washington.
Powell isn't taking it lying down. He released a video statement on January 11, calling the investigation a "pretext." In plain English, he’s saying the administration is using a construction project as an excuse to bully him because he won't slash interest rates to the floor.
It’s a high-stakes game of chicken.
✨ Don't miss: Walmart Distribution Red Bluff CA: What It’s Actually Like Working There Right Now
The Fed is supposed to be independent. That’s the whole point. If the President can just fire the person in charge of the money supply because they don't like the interest rate, the "independence" of the central bank goes out the window. And when that happens, investors tend to freak out.
Can He Actually Do It?
Legally, it’s a mess.
The Federal Reserve Act says the President can remove a governor (including the chair) "for cause." Historically, "for cause" means you did something illegal or you're literally incapable of doing the job. It does not mean "I think you should have cut rates in September and you didn't."
If Trump tries to fire him for a policy disagreement, Powell would almost certainly sue. He’s already signaled he’d fight it.
- The Humphrey's Executor Precedent: This 1935 Supreme Court case is the shield Powell is holding. It basically says the President can’t fire heads of independent agencies just because they disagree on policy.
- The "Criminal" Angle: This is why the DOJ investigation is so critical. If Powell were actually charged or convicted of something related to the building renovation, that might give Trump the legal "cause" he needs to bypass the usual protections.
Why the Markets Are Shaking
You’ve probably seen the headlines about a "$1.5 trillion downside." That’s not just a scary number pulled out of thin air. Back in July 2025, when a rumor leaked that Trump was looking at a letter to justify firing Powell, the markets dipped instantly.
🔗 Read more: Do You Have to Have Receipts for Tax Deductions: What Most People Get Wrong
Investors hate uncertainty. If the Fed becomes a political tool, the value of the U.S. Dollar is at risk. We could be looking at 1970s-style inflation if the person setting rates is just doing whatever the White House says to win an election.
Currently, the 10-year Treasury yield is hovering around 4.2%. If the Fed’s independence is truly compromised, experts like Atakan Bakiskan at Berenberg bank warn that yields could soar, making it way more expensive for the government to borrow money.
Who Is Waiting in the Wings?
Trump has already started "auditioning" replacements. Powell's term as Chair actually ends in May 2026. So, even if he isn't fired, he’s likely a lame duck. Trump has been tossing around a few names:
- Kevin Warsh: A former Fed Governor who is seen as a frontrunner. He’s been a critic of the Fed for years.
- Kevin Hassett: The Director of the National Economic Council. He’s a Trump loyalist through and through.
- Scott Bessent: The current Treasury Secretary. Trump recently said he’s "out" because he wants to stay at Treasury, but in this administration, "out" can change to "in" by tomorrow morning.
Trump refers to them as "The Two Kevins." He says they are "very good," which is his way of saying they’d probably be more "loyal" than Powell has been.
The Reality Check
Look, Powell has been at the Fed since 2012. He was a Trump appointee in his first term, then Biden kept him on. He’s the ultimate "establishment" guy.
💡 You might also like: ¿Quién es el hombre más rico del mundo hoy? Lo que el ranking de Forbes no siempre te cuenta
Trump’s argument is that he’s a businessman and understands the "formula" better than Powell. He wants rates down to juice the economy, especially with the midterm elections looming. Powell's argument is that if you cut rates too fast while inflation is still a threat, you wreck the economy for the next decade.
Who's right? Honestly, it depends on who you ask, but the law currently sides with the guy in the Fed chair.
What Happens Next?
We aren't going to have a quiet spring. The next Fed meeting is January 27-28, 2026. Expect some fireworks there. Powell will likely be asked about the investigation, and he’ll likely give a "no comment" or a very stiff defense of the Fed's autonomy.
If you're an investor or just someone with a 401(k), here is the play:
- Watch the DOJ: If we see an actual indictment, the "for cause" firing becomes a 90% probability.
- Monitor the 10-Year Yield: If it spikes past 4.5%, the market is signaling that it no longer trusts the Fed to stay independent.
- Don't panic on every headline: Trump likes to keep people guessing. He calls it being "unpredictable." Often, the threat is the point, not the actual firing.
The most likely scenario? Powell stays until May 2026, finishes his term under a cloud of legal threats, and is replaced by one of the "Kevins." But with this President, "most likely" is a dangerous bet.
Keep a close eye on the court filings over the next two weeks. Any movement in the Lisa Cook case—another Fed governor Trump is trying to oust—will tell us exactly how the Supreme Court feels about the President's power to fire the people who control our money.