Powell Firing Tensions Rise Between Fed and White House
Federal Reserve Chair Jerome Powell is pushing back as the White House escalates efforts to potentially fire him “for cause.” After months of mounting political pressure from President Donald Trump and his advisers, Powell appears to be taking a firm stand to defend the Fed’s credibility and independence.
While Powell has long resisted responding directly to Trump’s public criticism, recent accusations from the administration regarding the cost and handling of the Fed’s headquarters renovation may have pushed him over the edge. This marks a critical moment in the growing Powell firing saga, with major implications for U.S. monetary policy and global markets.
Powell Addresses Renovation Controversy
At the center of the dispute is the $2.5 billion renovation of the Federal Reserve’s historic buildings on Constitution Avenue in Washington, D.C. Originally estimated at $1.9 billion in 2019, the cost ballooned by more than 33% due to supply chain disruptions, material price increases, labor costs, asbestos removal, and soil contamination.
Last week, Trump’s budget director Russell Vought accused Powell of either lying to Congress about the project or failing to follow proper permitting procedures — grounds, they claim, for dismissal “for cause.” The White House further moved to stack the National Capital Planning Commission — the body that must approve the renovation — with loyal advisers.
In response, the Fed quietly posted a detailed FAQ on its website over the weekend to clarify the project’s specifics. It denies building any VIP dining rooms and explains that the so-called “rooftop gardens” are actually green roofs similar to those found on many federal buildings — encouraged by the General Services Administration.
Powell has also requested the Fed’s inspector general to investigate the project, a move seen as a direct counter to the White House’s narrative and an effort to protect the central bank’s transparency.
Powell Firing Could Undermine Fed Independence
A Powell firing could have major consequences for the perception of the Fed’s independence — a cornerstone of effective monetary policy. Removing a Fed Chair before their term ends, especially for political reasons, would be unprecedented and could rattle financial markets.
“Equities would likely sell off on impact, on a risk-off flight to safety,” said Padhraic Garvey, head of research for the Americas at ING. “This would be an effective forced exit of a reputable Fed Chair, something the market has never seen before.”
However, Garvey noted that the shock might be short-lived. Investors could quickly pivot to anticipating deeper rate cuts if Powell were replaced by a more dovish successor aligned with Trump’s economic agenda. “Inflation is not necessarily a bad thing for equities,” he added.
Is Powell’s Leadership Already in Doubt?
Some financial experts believe the damage to Powell’s credibility has already been done. Nancy Tengler, CEO of Laffer Tengler Investments, criticized Powell for policy missteps — notably, the rate hikes of 2018 that contributed to a short-term bear market and the Fed’s delay in addressing inflation in 2021.
However, others argue the impact of a Powell firing could be more muted. Jim Reid, global head of economics at Deutsche Bank, said the rest of the Fed’s board could help restore confidence by reaffirming the institution’s independence.
Even if Powell is replaced by a “super-dove” willing to lower interest rates, ING’s Garvey believes the Fed’s internal structure would prevent abrupt shifts in policy. “It’s a majority decision,” he explained. “Even with a new Chair, the Committee is unlikely to cave to political pressure unless economic conditions warrant a change.”
Conclusion: A Crucial Test for Central Bank Independence
Whether Powell survives the White House’s latest offensive or not, the unfolding drama presents a major test of the Federal Reserve’s resilience and independence. As the possibility of a Powell firing looms, global markets and policymakers are watching closely.
This is more than just a clash between personalities — it’s a defining moment for the integrity of U.S. monetary policy.
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