Trump said he held back from firing Powell because he hates being controversial, then told Fox Business what happens if Powell doesn’t leave in May

President Donald Trump has issued a direct threat to fire Federal Reserve Chair Jerome Powell if Powell does not leave when his term expires in May. As detailed by the BBC and GovFacts, the two have been in a bitter dispute over Powell’s refusal to cut the central bank’s interest rate despite Trump’s repeated demands.

Powell’s term expires on May 15, but he has said he plans to remain until his successor, Kevin Warsh, is confirmed by the Senate. “Then I’ll have to fire him,” Trump told Fox Business when asked about Powell’s intent to stay. Trump also claimed he had previously held back, saying, “I’ve wanted to fire him, but I hate to be controversial.”

Treasury Secretary Scott Bessent, speaking at a White House press briefing, said he is “very optimistic” Warsh’s confirmation will happen before May 15. Bessent added that Tillis had publicly called Warsh a great candidate, urging the committee to move forward with hearings.

A Republican senator is blocking Warsh’s confirmation unless a criminal probe into Powell is dropped

The path to Warsh’s confirmation is complicated by Senator Thom Tillis, who sits on the committee overseeing Federal Reserve nominations. Tillis has threatened to block Warsh unless the Trump administration drops a criminal investigation into Powell tied to cost overruns on the Federal Reserve building renovation. Trump has refused, telling Fox Business, “Don’t you think we have to find out what happened there?”

Trump has previously accused Powell of mishandling the renovation, claiming billions were spent on a project that could have cost “tens of millions,” and publicly called him a “knucklehead” doing “a lousy job.” Stock markets and the US dollar slipped earlier when it emerged Trump had considered firing Powell, though he denied it at the time, saying it was “highly unlikely unless he has to leave for fraud.” Amid broader tensions over Trump’s handling of key institutions, Senator Mark Kelly publicly challenged the administration’s diplomatic strategy in a separate but related critique of presidential overreach.

The question of whether a president can legally fire a Fed chair is unsettled. The Federal Reserve Act of 1913 established the Fed as an independent body, and the law states Board members “shall hold office for a term of fourteen years… unless sooner removed for cause by the President.” The phrase “for cause” is the crux of the legal debate, and the Act does not define it. Courts and legal experts have generally interpreted it to mean specific misconduct or incompetence, not policy disagreements over interest rates.

The 1935 Supreme Court case Humphrey’s Executor v. United States reinforced protections for officials at independent agencies performing quasi-legislative and quasi-judicial functions. The Federal Reserve, with its monetary policy and bank supervision roles, falls under that protection. More recent Supreme Court decisions have shown skepticism toward removal restrictions for single-headed agencies, but the Court has suggested the Fed’s multi-member structure gives it a stronger constitutional basis for independence.

A separate legal gray area concerns demotion. Some argue a president could remove someone from the chairmanship without meeting the full “for cause” standard, citing President Truman’s 1948 demotion of Fed Chairman Marriner Eccles to Vice Chairman. Powell himself has stated he believes he cannot be legally fired or demoted. President Lyndon Johnson famously pressured Fed Chair William McChesney Martin Jr. to keep rates low to fund the Vietnam War, reportedly shoving him against a wall during a confrontation at his ranch. Martin later conceded to the pressure, which many economists tie to the high inflation of the 1970s.

Central bank independence exists to solve what economists call the “time-horizon problem,” where elected officials may push for low interest rates ahead of elections at the cost of long-term price stability. The 1951 Treasury-Fed Accord formalized that separation after inflation reached nearly 21 percent annually. Global research consistently shows that countries with more independent central banks tend to have lower and more stable inflation. Oil market disruptions have added further economic pressure globally, including the ongoing closure of the Strait of Hormuz, which has driven Brent crude to $126 per barrel at its peak and raised concerns about sovereign credit ratings and fiscal stability.

Powell has consistently maintained that the law does not permit his removal for political reasons and that he would not resign if asked.