The Node: The Plot to Fire Powell

Donald Trump’s vocal dissatisfaction with Federal Reserve Chairman Jerome Powell has escalated, fueled by Powell’s reluctance to further lower interest rates despite Trump’s calls for the lowest rates globally. Trump has repeatedly threatened to fire Powell, citing his perceived negative impact on the U.S. economy. However, Powell maintains that Trump lacks the legal authority for such a dismissal, and his term extends until May 2026.

The criticism of Powell extends beyond Trump. Bill Pulte, director of the Federal Housing Finance Agency, alleges political bias and has called for a congressional investigation. Several Republican members of Congress, including Senators Rick Scott and Tommy Tuberville, and House Judiciary Chair Jim Jordan, have also voiced their disapproval of Powell’s recent actions. Former Federal Reserve governor Kevin Warsh, a potential Powell replacement, has even called for a “regime change” at the Fed.

While the Federal Reserve operates independently, protecting Powell from arbitrary dismissal, the pressure to remove him is intensifying. Critics have seized upon the Fed’s $2.5 billion headquarters renovation, alleging potential misconduct or misleading congressional testimony. This project, initiated years before Powell’s appointment, now serves as a new avenue of attack.

Recently, the pressure reached a fever pitch. Treasury Secretary Scott Bessent announced a “formal process” to replace Powell, followed by Congresswoman Anna Paulina Luna’s tweet declaring his firing “imminent.” This fueled speculation, with Polymarket odds reaching 27%. While Bloomberg and CBS reported that Trump was considering immediate action, and The New York Times claimed a dismissal letter had been drafted, Trump later denied these reports and downplayed accusations of fraud regarding the headquarters renovation.

Despite the ongoing controversy, the likelihood of immediate interest rate cuts remains low. CME FedWatch data shows a mere 2.6% chance of rate reductions at the July 30th Federal Open Market Committee (FOMC) meeting, although the probability increases to nearly 60% for September. The situation remains fluid, with the future of Powell’s chairmanship uncertain.