Trump vs. the Fed: Powell's Job on the Line

Powell Under Fire: $2.5B Renovation Sparks a Firestorm

In the past week, pressure on Fed Chair Jerome Powell has escalated sharply. Leaks from the White House, rising tensions in Congress, and a ballooning renovation budget have all become political ammunition in the fight over his future.

A watchdog report confirmed the Fed’s headquarters renovation budget soared from $1.9 billion to $2.5 billion—over 30% higher than planned. That set off bipartisan outrage and put Powell in the crosshairs.

Though Powell defended the upgrade and denied any luxury add-ons, a 2021 NCPC document listed features that match what he claimed didn't exist, undermining his credibility.

OMB Director Russell Vought piled on, accusing Powell of losing control of spending. One top official even said Powell is weighing resignation. But Powell’s denials haven’t calmed the storm.

Trump Eyes Removal—but Courts Limit His Hand

The renovation scandal isn’t the real issue—it’s just the spark. Since returning to office, Trump has repeatedly pushed Powell to slash rates. But Powell refused, even after Q1 GDP dropped -0.5%, insisting inflation hasn’t been tamed.

While the Supreme Court ruled in May that policy disputes aren’t grounds for removal, Trump reportedly explored firing Powell anyway. According to insiders, he floated the idea during GOP meetings and even showed a draft dismissal letter. Hours later, he walked it back—but hinted he might reconsider “if fraud is involved,” keeping the door open under a misconduct frame.

Internal Split: Treasury Secretary Warns Against Removing Powell

Treasury Secretary Scott Bessent privately urged Trump to keep Powell through the end of his term, warning that early removal could trigger market instability and legal risks—especially with the Fed already tilting dovish.

Trump responded by denying the report and declaring, “No one knows the market or America better than me.”

What Happens If Powell Goes?

Trump blames Powell for high rates “killing housing” and pricing out young buyers. He wants an immediate 300-basis-point cut—far beyond Wall Street’s expectations.

But forcing early rate cuts under political pressure would shatter trust in the Fed’s independence. Investors would demand higher long-term yields, driving up borrowing costs and risking inflation resurgence.

In short: removing Powell might ease Trump’s short-term goals—but could trigger long-term damage to markets, the dollar, and the Fed’s credibility.

With a policy meeting due in late July, Powell is still at the helm. But whether he leaves or not, the Fed’s independence already looks compromised—and markets know it.