What used to be an independent body, the Federal Reserve, is now part of the political discussions under the Trump administration.
President Donald Trump has escalated his attacks on Fed Chair Jerome Powell, claiming his termination “cannot come fast enough.” But this isn’t just about interest rates.
Trump is pushing to reshape the structure of US government institutions, starting with the Federal Reserve.
But is that even legal? A Supreme Court case already in motion may give him the legal authority he needs.
How did it come to this?
Trump’s public feud with Jerome Powell began years ago during his first term. Though Trump appointed Powell as chair in 2018, their relationship soured almost immediately.
Back then, Trump wanted low interest rates to boost the stock market. Powell, on the other hand, raised interest rates, citing inflation concerns.
Throughout 2019 and into the pandemic year of 2020, Trump repeatedly lashed out.
He called Powell “the enemy” and suggested firing him. He even asked White House lawyers to explore legal options for his removal.
If the Fed had done its job properly, which it has not, the Stock Market would have been up 5000 to 10,000 additional points, and GDP would have been well over 4% instead of 3%…with almost no inflation. Quantitative tightening was a killer, should have done the exact opposite!
But Powell has always held firm, insisting the Fed must remain independent and data-driven.
Fast forward to 2025, and the feud has reignited. Powell warned recently that Trump’s aggressive tariffs would raise inflation and slow growth.
Trump responded with renewed threats, accusing Powell of “playing politics” and saying his termination “cannot come fast enough.”
What’s at stake legally?
At the center of the legal fight is a 1935 Supreme Court ruling known as Humphrey’s Executor.
This case set the lasting precedent that presidents cannot remove officials at independent regulatory agencies without just cause.
The goal was to protect agencies like the Fed from political interference.
But Trump wants that precedent overturned. His administration argues that it infringes on presidential authority under the Constitution.
According to Solicitor General D. John Sauer, the president should not have to delegate executive power to officials who oppose his agenda.
The legal argument gained traction in 2020 when the Supreme Court ruled 5–4 that the president could fire the head of the Consumer Financial Protection Bureau.
But that case dealt with a single-director agency. The Fed, which operates under a seven-member board, has so far remained out of reach.
Now, Trump is using a different case. This one involves federal labor boards in order to bring the issue back to the Court.
And this time, the implications are much broader.
Is this Supreme Court case really about the Fed?
The case before the Court involves Trump’s firing of two officials from the National Labor Relations Board and the Merit Systems Protection Board.
While it may seem unrelated, the outcome could affect how all independent agencies are governed, including the Federal Reserve.
Trump’s lawyers insist the Fed is different. They point to its unique funding, history, and structure.
In past rulings, the Court has acknowledged that the Fed is “in a different league.”
Still, critics argue that if the Court weakens or overturns Humphrey’s Executor, it opens the door to removing Powell too.
Powell, for his part, has said he does not believe the case will apply to the Fed.
But former NLRB Chair Gwynne Wilcox, one of the dismissed officials, warned the Court that a ruling in Trump’s favor could jeopardize the Fed’s independence and shake investor confidence.
Why the Fed remains a special case
Unlike most agencies, the Federal Reserve is protected by multiple layers of legal and structural insulation.
Its governors can only be removed “for cause,” and the institution funds itself rather than relying on Congress.
These features were designed to protect monetary policy from political interference.
The Fed also serves a dual mandate: price stability and maximum employment.
Powell and his team have kept rates steady in recent months, waiting for more clarity on how tariffs might affect inflation and growth.
Trump sees this pause as obstruction.
Still, the Supreme Court has never directly ruled on whether the president can fire a sitting Fed chair.
And while current precedent leans in Powell’s favor, a change in legal interpretation could change everything.
What is Trump’s inner circle saying?
There is some disagreement within Trump’s own team.
Treasury Secretary Scott Bessent has warned that weakening the Fed’s independence could harm financial markets and investor trust. He called monetary policy “a jewel box that must be preserved.”
On the other hand, economic adviser Kevin Hassett has softened his earlier position. In 2021, he said firing Powell would damage the Fed’s credibility.
But now, he says the president’s team is “studying” whether it can be done legally. He cited “new legal analysis” but didn’t provide specifics.
The calculations from Trump’s team are clear: He wants more control, but he also knows that markets could panic if the Fed appears politicized.
Why it matters and what comes next
This isn’t just about Powell or interest rates. It’s about whether presidents can exert direct control over institutions built to be independent.
If Trump succeeds in getting the Supreme Court to weaken Humphrey’s Executor, it would set a legal precedent that could outlast his presidency.
The current feud, which is all public for everyone to see, is just the tip of the iceberg.
Whatever the outcome, it will certainly have extraordinary implications in legal, political, economic, and institutional domains.
Some say that Trump is attempting the most aggressive executive power expansion since FDR.
The Supreme Court is expected to rule on the labor board case soon.
For now, Powell remains in his role until the end of his term in 2026.
But if the Court grants Trump firing powers, the fight for control of the Federal Reserve will escalate.
If the Court hesitates to touch the Fed, Trump may still pursue alternative legal interpretations, stacking the Fed with loyalists, or aim to reshape its structure via executive orders and appointments.
The post Trump’s war with the Federal Reserve: inside the legal fight to fire Jerome Powell appeared first on Invezz