The drama between the White House and the Federal Reserve just took a weird, slightly confusing turn. After months of basically calling Jerome Powell every name in the book—from "major loser" to "imbecile"—Donald Trump has hit the brakes. He’s now saying he doesn't plan to fire Powell.
Honestly, it feels like a bit of a head-spinner if you’ve been following the play-by-play. Just a few weeks ago, the talk was all about "for cause" removals and criminal investigations. Now? It’s a bit more of a "let him finish the job" vibe, even if that vibe is buried under a mountain of fresh insults.
The Reversal: Why Trump Isn't Pulling the Trigger
So, why the sudden change of heart? Basically, it’s complicated. Trump confirmed recently that while he isn't exactly a fan of the Fed Chair's speed on interest rate cuts, he has "no intention" of ousting him before his term ends in May 2026.
You’ve got to look at the math here. Firing a Fed Chair isn't like firing a cabinet member. It's not a "you're fired" and done deal. Legal experts and even some of Trump's own allies, like Treasury Secretary Scott Bessent and Senator Thom Tillis, have been whispering (or shouting) in his ear about the market chaos that would follow.
The reality is that the Fed is built to be a fortress. The Supreme Court has been pretty clear: you can’t just fire these folks because you don't like their math. You need "cause." For a while, the administration tried to use the $2.5 billion renovation of the Fed’s headquarters as that "cause," hinting at mismanagement or even fraud. But without a smoking gun, a legal battle would be a nightmare.
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The Power of the "Shadow Chair"
Instead of a messy firing, the strategy seems to have shifted toward a "shadow" approach. Why go through the legal mud of a termination when Powell’s term is up in just a few months anyway?
- Succession is already in the works: Names like Kevin Hassett are already floating around as the likely replacement for May 2026.
- Market Stability: The moment rumors of a Powell firing hit the wires in July 2025, the Dow took a nosedive. Trump, who often views the stock market as a scorecard for his presidency, isn't keen on a self-inflicted crash.
- The "Lame Duck" Factor: By publicly announcing he won't fire him, Trump actually robs Powell of some of his "martyr" status while still keeping the pressure on for rate cuts.
The Friction That Never Fades
Even though the "firing" threat is off the table for now, don't think for a second that these two are going to be grabbing lunch anytime soon. The tension is thick enough to cut with a steak knife.
Trump's beef is simple: he wants interest rates at the floor. He’s been pushing for rates as low as 1% to "juice" the economy and help manage the national debt interest. Powell, meanwhile, is the guy holding the umbrella in a rainstorm, worried that if he cuts too fast, inflation (which only recently cooled down) will come roaring back like a bad 80s sequel.
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A Timeline of the Grudge
It’s kind of funny when you remember that Trump actually picked Powell back in 2017. He called him "strong" and "smart" then. Fast forward through a global pandemic, a historic inflation spike, and a return to the Oval Office, and the tone has... shifted.
- 2018: The honeymoon ends as Powell raises rates. Trump calls the Fed "crazy."
- 2020: A brief truce during COVID-19 when the Fed slashed rates to zero.
- 2025: Trump returns to office, immediately demanding cuts. He starts visiting Fed construction sites, calling the renovation costs "disgraceful."
- January 2026: The DOJ launches an investigation into the Fed's building budget. Powell calls it a "pretext" to influence policy.
What Most People Get Wrong About Fed Independence
There’s this common idea that the President is the boss of the Fed. In reality, it’s more like a tenant-landlord relationship where the tenant has a really, really long lease.
The Federal Reserve Act says members can be removed "for cause," but it doesn't define what that is. Historically, it means things like "inefficiency, neglect of duty, or malfeasance in office." It does not mean "setting interest rates at 4% when I wanted them at 2%."
If Trump were to try and fire Powell for policy differences, Powell—who is a lawyer by trade—would almost certainly sue. We’d end up with a Supreme Court case that would make the "Big Beautiful Bill" debates look like a playground tiff.
The Market’s Sigh of Relief
Wall Street is basically the audience at a high-wire act right now. Every time Trump says "I don't plan to fire Powell," the markets breathe. They hate uncertainty. If Powell were removed, investors wouldn't know who was steering the ship. Would the new guy just print money to please the White House? Would inflation spiral?
That uncertainty leads to "risk premiums," which is just a fancy way of saying everything gets more expensive because people are scared. By backing off, Trump is essentially choosing a stable market over a personal victory.
Actionable Insights for the Rest of Us
So, what does this actually mean for your wallet? Since the immediate threat of a Fed leadership vacuum is gone, here’s the deal:
- Watch the May 2026 Date: That’s the real finish line. Expect a lot of "trial balloon" names for the next Chair to pop up in the news over the next six months.
- Expect Volatility, Not Chaos: Trump will still tweet (or post) about Powell. He’ll still call for lower rates. Markets are getting used to the noise, so don't panic every time a headline pops up.
- Interest Rates Will Still Be "Higher for Longer": Powell has shown he doesn't cave to political pressure. If the data says keep rates steady, he’ll keep them steady, even if the White House is yelling. Plan your mortgages and loans accordingly.
The situation is a classic case of political theater meeting economic reality. Trump knows he has the "bully pulpit," but Powell has the law and the markets on his side. For now, they’ve reached a sort of tense ceasefire. Powell keeps his job, and Trump keeps his right to complain about it.
Next Steps: Keep an eye on the Senate Banking Committee hearings. If the DOJ investigation into the Fed's renovations starts gaining actual traction, the "for cause" argument might come back from the dead. Otherwise, we’re on a slow, bumpy ride to May 2026.