Sen. Warren Slams Political Pressure on Fed: ‘We Need Independence'

Once again, President Donald Trump demonstrated his power to shake up global financial markets. This time, by returning to one of his favorite topics: whether to fire Federal Reserve Chair Jerome Powell.

In an echo of the havoc that Trump unleashed with his trade war in early April, markets were briefly turned upside-down on Wednesday after a White House official said the president was likely to soon remove Powell.

Stocks, the dollar and long-term US government bonds quickly retreated, while short-term Treasuries rallied on speculation that whomever Trump appoints to replace Powell will bend to the president’s will and cut interest rates. Yet in less than an hour, the moves unwound after the president downplayed the possibility, saying he was “not planning” to fire Powell, someone he’s been lobbing almost daily criticisms at for moving too slow.

US Senator Elizabeth Warren, a Massachusetts Democrat, says Federal Reserve Chair Jerome Powell's successor needs to be independent and not from President Donald Trump's administration. Speaking on "Balance of Power," Senator Warren also comments on crypto regulation and the rescissions package currently before Congress.

President Donald Trump is on a relentless campaign to pressure the Federal Reserve into cutting interest rates, renewing the question of how much a US president can and should influence an institution designed to be independent.

The Fed’s decision to hold interest rates steady so far this year has deeply angered Trump. He’s questioned the central bank’s decision making and regularly lambasted Chair Jerome Powell, sometimes on a daily basis, calling him “very dumb” and one of the “most destructive” people in government.

Some administration officials appear to be building a case that  Powell’s handling of matters related to the renovation of the Fed’s headquarters offers Trump an opportunity to meet the high legal standard required to remove the central bank chief.

Asked if he would fire Powell, whom he had discussed dismissing in 2018, Trump said on July 16 that it was “highly unlikely, unless he has to leave” due to “fraud.” Powell, whose term as chair ends in May 2026, has said he wouldn’t resign if asked by Trump.

Can Trump fire Powell?

The most direct way of sending a message to the Fed would be to remove its chair, as Trump discussed doing in 2018 when he was angry with Powell over a series of interest-rate hikes.

A president likely can’t dismiss a Fed chair easily, legal scholars say, and it’s never been done. Section 10 of the Federal Reserve Act says members of the Fed’s Board of Governors, of which the chair is one, can be “removed for cause by the president.” Courts have interpreted “cause” to mean inefficiency, neglect of duty or malfeasance in office.

Whether a president can strip a governor of the chairmanship is more ambiguous because the law doesn’t explicitly provide the “for cause” protection for that role, said Peter Conti-Brown, a professor and Fed historian at the Wharton School of the University of Pennsylvania. Regardless, because of the “for cause” protections for governors, stripping a Fed chair of that title might mean the individual could remain on the board. It also might not remove such an individual from another powerful perch: head of the Federal Open Market Committee, or FOMC, the policymaking group that sets interest rates. Its members, not the president, choose who leads it.

The Supreme Court provided a degree of clarity about Powell’s job security. In a May ruling it signaled that it would likely shield the Fed in any future decision backing Trump’s ouster of  top officials at other independent federal agencies without cause. In its ruling, the court called the central bank a “uniquely structured, quasi-private entity.”

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals