Layla M. from Little Rock, AR asks: Dear Mitch, I was reading over the weekend that President Trump wants to fire the head of the Federal Reserve bank. Do you think something like this is possible and/or would cause more uncertainty? I would appreciate your comments, thank you.
Mitch’s Response:
There has indeed been some chatter in the financial media recently about this topic. The issue has become quite political, so I want to be clear up front that my comments are politically agnostic and meant to be from an investor perspective.
The first point to make is that the legal framework for firing a Federal Reserve Chairman is murky. While the president appoints the Fed Chair, the Federal Reserve Act allows for the removal of a member of the Board of Governors—including the Chair—only “for cause.” That term has historically been interpreted to mean serious misconduct or incapacity, not disagreements over interest rate policy.1
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It appears that the Trump administration is already seeking to overturn a 90-year-old doctrine that shields independent regulators, including Fed officials, from being dismissed without clear cause. The issue with Chairman Powell appears to be over his decision to pause rate cuts. While economic growth may be downshifting, inflationary pressures may be building given the tariff policy. That puts the Fed in something of a bind—lowering rates preemptively in this environment could worsen inflation, but if the Fed waits too long, it could fail to prevent a downturn in employment and consumer demand.
The matter appears to have come to a head after Chairman Powell commented on the Fed’s need to carefully balance inflation and unemployment in the face of trade-related supply shocks, which prompted a response from President Trump saying Chairman Powell’s termination “cannot come fast enough.” President Trump wants rate cuts, and Chairman Powell is ushering the Fed into a more cautious ‘wait-and-see’ stance. It may be that this is more of a public disagreement than the making of a financial crisis.
There’s really no way to know how this issue will shake out. In my view—again from a pure economic and investment standpoint—firing the Fed chair would arguably create more economic risks than benefits, potentially undermining confidence in U.S. markets and complicating future appointments to the Fed. An important part of financial stability is global trust that the U.S. central bank and money supply are controlled by an independent body of policymakers, and a major compromise to that could have unintended consequences.
That’s why it helps to step back and consider how markets have responded to uncertainty in the past. To help you keep perspective and make informed decisions, I recommend our free guide, How Geopolitical Crises Affect the Stock Market3. This resource takes a data-driven look at how major global events have influenced investor behavior, economic growth, and market performance.
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Disclosure
1 Wall Street Journal. April 17, 2025. https://www.wsj.com/economy/central-banking/trump-jerome-powell-fed-chair-conflict-e1910cf0?mod=economy_lead_pos5
2 Zacks Investment Management reserves the right to amend the terms or rescind the free How Geopolitical Crises Affect the Stock Market offer at any time and for any reason at its discretion.
3 Zacks Investment Management reserves the right to amend the terms or rescind the free How Geopolitical Crises Affect the Stock Market offer at any time and for any reason at its discretion.
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