the staff of the Ridgewood blog
Ridgewood NJ, as the U.S. economy grapples with market uncertainty and persistent inflation, questions are swirling about whether a future President Donald Trump could fire Federal Reserve Chairman Jerome Powell before his term ends in 2026. Legally speaking, the answer remains murky—but the political and financial implications are massive.
Can a President Fire the Fed Chair?
Under the Federal Reserve Act, members of the Federal Reserve Board—including the Chair—serve fixed terms and can only be removed “for cause” by the President. The Act doesn’t define what constitutes “cause,” but courts have typically interpreted it as “inefficiency, neglect of duty, or malfeasance.” This means disagreements over policy or personal dislike aren’t considered valid reasons for removal.
Legal Precedent: Humphrey’s Executor v. United States
A pivotal Supreme Court case from 1935, Humphrey’s Executor v. United States, restricted the president’s power to fire officials from independent regulatory agencies like the Federal Trade Commission (FTC) and, by extension, possibly the Federal Reserve.
President Franklin D. Roosevelt had attempted to fire an FTC commissioner, William Humphrey, for political reasons. The court ruled this action unconstitutional, setting a precedent that agency heads cannot be removed solely for political disagreement.
This case may serve as a powerful legal obstacle to any similar effort aimed at Powell.
Trump’s Position and Ongoing Legal Battles
Trump has already launched legal challenges to similar “for cause” clauses in other agencies. Whether these arguments would hold up when applied to the Federal Reserve remains to be seen. However, no president has ever successfully removed a Fed Chair mid-term, and doing so could risk rattling already-volatile financial markets.
Powell’s Performance: The Scorecard
Fed Chair Jay Powell has stated a clear goal: to maintain 2% inflation via the PCE price index (Personal Consumption Expenditures). According to a scorecard maintained by economist Louis Woodhill, Powell has met this target—within a 10% margin of error—just two times in 73 months.
That’s a .027 batting average for hitting his own inflation target. Critics argue that may qualify as “inefficiency,” but whether it’s enough to meet the legal definition of “for cause” remains uncertain.
What’s Next?
Trump may be better off waiting for Powell’s term to expire in May 2026, rather than risk igniting a constitutional crisis or shaking investor confidence. However, that hasn’t stopped speculation or legal strategizing.
Bottom Line
While it’s legally unclear whether a president can remove the Fed Chair “for cause” based on performance, history and legal precedent suggest it would be an uphill battle—and one with serious economic consequences.
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