Will Trump fire Fed Chairman Jerome Powell?

Attacks on Fed Chairman Jerome Powell are happening almost daily as the Trump administration tries to force him to step down early.

At the start of July, Trump posted the following image to his Truth Social account:

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As you can see, Trump believes US interest rates should be in the 0.25% to 1.75% range.

There are only two reasons a central bank would cut rates that low; one is that the economy is in trouble (that's the case in Cambodia, Japan and Thailand who are all affected by China's slowdown). Or you have very little inflation and are in danger of deflation (that's the case in Switzerland where a very strong Swiss franc is keeping the costs of imports including oil, low).

Neither applies to the American economy which is coping quite well with the 10% tariffs that have been in place since April 9th, and where the weakening dollar means inflation might still be a threat.

Trump has followed up with tweets like this:

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And every time he's in front of the press (which is almost daily), he bashes Powell.

The Federal Reserve Act says that a Fed Governor (including the Fed Chair) may be removed “for cause by the President.” However, “for cause” is not defined in the statute and has never been tested in court in this context.

It's now becoming clear that the Trump administration believes it has found "cause" - the overspend on the renovations of the Federal Reserve building. The extremely well-connected journalist Nick Timiraos wrote about how this might play out in the Wall Street Journal:

https://www.wsj.com/economy/central-banking/jerome-powell-fed-renovations-trump-fb9793df

White House advisers are ramping up a pressure campaign against Federal Reserve Chair Jerome Powell by alleging he either lied to Congress about the Fed’s headquarters renovation or grossly mismanaged it, potentially creating a new legal avenue to oust him.

The complaints have opened a new line of attack against Powell as part of a broader push for him to lower interest rates. It follows President Trump’s demands that the Fed consider federal debt-service costs when setting rates, something the institution has strongly resisted after securing its independence from the Treasury Department in 1951.

... The administration formalized its latest challenge Thursday with a letter from Russell Vought, Trump’s budget director. In it, he implied Powell either made false statements to Congress about the $2.5 billion renovation of three office buildings overlooking the National Mall in Washington or failed to comply with permitting rules around capital-area construction.

Trump simultaneously stacked the federal commission that must sign off on major construction projects in the capital with three White House advisers, including James Blair, a deputy chief of staff.

The renovations are over budget because there is a lot of asbestos that needs to be dealt with - that's the hazard of renovating these old buildings.

But Trump doesn't care. If rates are not cut at the next Fed meeting on June 30th, he may pull the trigger.

The markets will react badly to Powell being forced out. Bond yields are likely to go higher on the assumption that Powell's replacement will cut rates and let inflation rip.

Scott Bessent and others will be trying to talk Trump down and hoping he chickens out before doing the deed.