Trump Backtracks on Firing Powell After Market Downturn

U.S. President Trump has backtracked on his earlier statements about potentially firing Federal Reserve Chair Jerome Powell. Just hours after indicating to House Republicans that he was considering removing Powell from his position, Trump clarified to the press that such plans were unlikely. "We’re not planning on doing it," he stated at the White House, adding that while he doesn't rule out any possibilities, it is highly unlikely unless Powell is found to have committed fraud.

This reversal came less than 24 hours after Trump had a different message during a meeting with GOP lawmakers. During a discussion about crypto bills stuck in Congress, Trump directly asked the lawmakers if he should proceed with firing Powell. According to a senior White House official, the lawmakers expressed approval for the idea, and Trump indicated that he was likely to do so soon.

Trump even went as far as to draft a termination letter addressed to Powell and showed it to the group during the meeting. This exchange occurred during a conversation that was supposed to focus on blockchain legislation. Federal Reserve officials have remained silent on the matter, with Powell himself reiterating that his removal is not permitted under the law. No U.S. president has ever actually fired the head of the central bank, although many have publicly criticized them.

Initially, when reports surfaced that Trump was considering firing Powell, the markets experienced a downturn. However, these losses were quickly reversed after Trump denied the reports to reporters, highlighting the significant impact of this issue. Inside the White House, attacks on Powell have continued, with several top Trump aides pushing for the Fed to lower its main interest rate. Recently, they have criticized Powell for renovations at the Fed’s Washington, D.C., headquarters, which have been plagued by delays and cost overruns.

Trump has floated the idea of fraud related to the $2.5 billion remodel of the Federal Reserve’s building, stating that "fraud is possible." He has also criticized Powell for not lowering interest rates, despite Powell keeping them flat since cutting them in late 2024. Trump wants major action, specifically 3 percentage points of cuts, bringing the federal funds rate from its current range of 4.25% to 4.5% down to around 1.25%.

There is clear division within the Republican Party regarding this matter. Arkansas Rep. French Hill, who chairs the House Financial Services Committee, stated that he does not see the firing happening. Treasury Secretary Scott Bessent also expressed that he did not expect any action from the president. However, Republican Anna Paulina Luna from Florida posted on X that she had heard from a very serious source that Powell was getting fired and that she was 99% sure the firing was imminent.

Trump himself nominated Powell in November 2018, replacing Janet Yellen. Powell was confirmed by the Senate in February 2019, but the relationship has been contentious ever since. Trump has repeatedly criticized Powell, both during his first term and now during his second. Additionally, Trump criticized the rest of the Fed Board, stating that they too are not doing their jobs as they should. Notably, he appointed several members of the Fed Board, including Michelle Bowman and Christopher Waller.