Donald Trump wants Jerome Powell out—and markets are paying close attention. Over the past few months, the former president has privately floated plans to fire Federal Reserve Chair Jerome Powell, unhappy with what he calls Powell's “political games” and refusal to slash rates fast enough. In closed-door meetings at Mar-a-Lago, Trump reportedly discussed replacing Powell with former Fed governor Kevin Warsh, though Warsh has warned the move would be costly and unnecessary. Despite the caution, Trump hasn't backed off. “If I want him out, he'll be out of there real fast,” he declared last week. While no final decision has been made, the conversations are getting louder—and closer to real.
Behind the scenes, the White House is divided. Treasury Secretary Scott Bessent is holding the line, calling the Fed's independence a “jewel box” that must be protected at all costs. But others in Trump's circle are spoiling for a fight, pushing legal arguments that the Fed chair can be dismissed without cause. They're watching closely as the Supreme Court reviews an old precedent—Humphrey's Executor—that could redefine the limits of presidential power. Powell, for his part, is ready to battle it out in court. And if removed, he could be re-elected chair of the Fed's rate-setting committee, rendering Trump's move symbolic at best.
For investors, the implications are massive. The mere hint of White House interference with monetary policy could send shockwaves through markets, spiking Treasury yields and undercutting confidence in the Fed's ability to control inflation. Powell was first appointed by Trump in 2017 and reappointed under Biden. If Trump tries to sack him early, it sets a dangerous precedent—one that could weaken global trust in U.S. institutions and make inflation harder to tame. The Fed may survive this storm intact, but the fight could get uglier before it's over.
