Unraveling the legal, economic and market ramifications if Trump tries to fire Fed Chair Powell

If President Donald Trump tries to fire Federal Reserve Chair Jerome Powell, it would set off a courtroom battle that would ly head to the Supreme Court

Most people familiar with the situation say Powell would sue if Trump tries dumping him

Despite seemingly low chances of success, going after Powell still could serve a political purpose for Trump

Even if the Fed did cut rates, it could do more harm than good to Trump's goal of lowering finance costs on the national debt

Nevertheless, Federal Reserve Chair, Jerome Powell and U (something worth watching), amid market uncertainty

Furthermore, President Donald Trump

Annabelle Gordon | Kevin Lamarque | ReutersIf President Donald Trump tries to fire Federal Reserve Chair Jerome Powell, it would almost certainly set off a courtroom battle that legal and policy experts say is bound to get messy, with uncertain impacts on the central bank, financial and the economy

The tempestuous situation poses a myriad of thorny questions for which there are no easy answers considering no president ever has tried to unseat a Fed chair

Among them:Does Trump have the authority to remove Powell

At the same time, The answer is almost certainly no, not without meeting the legal threshold of "cause, in today's financial world. " However, that raises additional questions over what would constitute cause, with growing suspicion in Washington and Wall Street that the president is using criticism over the Fed's building expansion as a pretext to establish that condition

What happens next from a legal standpoint

Most people familiar with the situation say Powell would sue if Trump tries dumping him, given the current landscape

The evidence shows case ly would head to the Supreme Court, which ruled recently that the quasi-governmental Fed is a special entity immune from arbitrary personnel moves regarding governors, in today's market environment

But that didn't address the issues surrounding cause (which is quite significant) (noteworthy indeed)

Conversely, Beyond a lawsuit, what else could Powell do

If he gets fired as chair of the Board of Governors, the Federal Open Market Committee, which is the Fed body that sets interest rates, simply could retain Powell as chair, giving him continued influence over monetary policy (which is quite significant)

Moreover, Furthermore, The FOMC chair historically has been the Fed board chair, but that's not a requirement (remarkable data)

Does Trump really want to fire Powell, or is he simply setting him up as a scapegoat should the economy go south

The president has shown himself to be a shrewd and often times calculating political player, and having Powell around as a punching bag could be useful as crucial mid-term elections apach. "What is extraordinary here is the president going back and forth and discussing loudly whether he might fire or try to fire the Fed chair," said Bill English, the Fed's former director of monetary affairs and now a Yale fessor. "Of course, we've never gone through that, so we don't know legally how that would work and how the courts would see that and so on

So, I think it's all things that we haven't seen before, and raises real uncertainties. "A rapid -faceEven by Trump's standards, the events surrounding Powell of late have been stunning, in today's market environment

After an ext campaign of ad hominem attacks on Powell and demands for lower interest rates, Trump met with Republican congressional members Tuesday evening and asked them if he should fire the Fed chair, according to a senior administration official

Moreover, After the GOP members showed their backing for the move, the president indicated to them he would move on Powell "soon," the official said (this bears monitoring)

On the other hand, Conversely, However, no sooner did news break of the meeting then Trump told reporters that he's not considering a move, saying it's "highly unly" while simultaneously wondering out loud whether alleged mismanagement of the $2

Subsequent reports suggested that Trump's lawyers indicated that he would have a hard time legally dismissing Powell

However, The Supreme Court's ruling in Trump v

Additionally, Wilcox this year called the Fed a "uniquely structured, quasi-private entity" whose governors enjoy insulation from removal for political or policy reasons

Moreover, That, of course, does not mean Trump won't try (something worth watching) (noteworthy indeed). "It's a very high bar legally, but there also haven't been really any historical precedents for it," Jonathan Kanter, former assistant attorney general during the Biden administration, said on CNBC, in today's market environment. "So it would get litigated in court, bably be quite a bit of a circus, but, yeah, the standard is very high, in today's financial world

Additionally, It has to be for cause, and it has to be for neglect, malfeasance, abuse (which is quite significant)

Additionally, "watch now9:1609:16Can President Trump fire Powell, given the current landscape

Moreover, Inside the cess to fire a Fed ChairSquawk BoxThe legal falloutPowell's options would entail suing and asking for a stay on any Trump removal action, Kanter said

As it winds through the legal system, the case would draw close attention and either could act as a bulwark for Fed independence, or reduce the normally sacrosanct central bank to just another political body subject to the whims of the Oval Office, considering recent developments. "The Supreme Court has signaled it would ly side with the Fed chair," Kanter said (quite telling), in today's market environment. "It views the Fed as historically different than other independent agencies

This demonstrates that n it would kick the case right back down to a district court, which would determine whether the president had a basis to fire the Fed chair. "Despite seemingly low chances of success, going after Powell still could serve a political purpose for Trump

Moreover, "I think Trump is setting it up so that there's a sword of Damocles hanging over Powell's head throughout the rest of his tenure," Kanter said. "If there is a sustained period of inflation or stagflation, Trump has the ability to say, well, it's this guy's fault because he didn't lower interest rates. "Indeed, the Trump-Powell dispute by all appearances runs deeper than qualms over the building renovations

In contrast, Quest for rate cutsTrump wants sharply lower interest rates, and he wants them now, economic consequences be damned

Meanwhile, The president was on the attack again Friday, railing against Powell and his fellow central bankers (something worth watching)

In a Truth Social post, Trump charged Powell and the FOMC officials are "choking out the housing market with their high rate, making it difficult for people, especially the young, to buy a house (quite telling)

He is truly one of my worst appointments. "Up until recently, Trump has reserved most of his criticism for Powell individually

At the same time, But on Friday, he also said, "the Fed Board has done nothing to stop this 'numbskull' from hurting so many people

In many ways the Board is equally to blame

On the other hand, " Finally, using his nickname for Powell, he said, "I can't tell you how dumb Too Late is - So bad for our Country (which is quite significant), in light of current trends

Additionally, "Besides Powell, Trump has two appointees on the board dating back to his first term: governors Michelle Bowman and Christopher Waller, both of whom have said they are leaning toward a rate cut when the FOMC meets at the end of July, given current economic conditions

Beyond those two, though, other members have not expressed any appetite for easing before the September meeting, given current economic conditions

However, On the other hand, There are 12 voters on the FOMC, and the chair is just one of them

Fed watchers including English, who served as the FOMC secretary, see policymakers pushed into a corner where cutting in July would seem acquiescing to Trump's demands

That's part of a larger concern on Wall Street over the reputational fallout the Fed faces as the Trump White House ramps up its efforts to use to influence monetary policy

Market, economic fallout"The experience of other countries in which governments have suppressed central bank independence has generally been a combination of a slippery slope and the occasional sudden drop," Jonas Goltermann, deputy chief economists at Capital Economics, said in a recent note. "Un raising tariffs, which can be withdrawn before the real damage is done, the reputational costs from firing Powell would be harder to undo. "Then there are the market and economic issues (remarkable data), in this volatile climate

Firing Powell would be unly to change the committee's apach to monetary policy, and in fact could harden its position on rates

Nevertheless, Even if the FOMC did cut, it could do more harm than good to Trump's goal of lowering finance costs on the national debt

The last time the Fed cut, in the final four months of 2024, Treasury yields rose almost in perfect reverse correlation to the rate reductions, and the same thing could happen again if perceive the Fed is surrendering its inflation-fighting credentials to placate Trump, considering recent developments. "The historical record suggests that political interference contributed to poor monetary policy in the late '60s and early '70s, with unfavorable consequences for inflation developments," JPMorgan Chase chief U

Economist Michael Feroli wrote. "Any reduction in the independence of the Fed would ly add upside risks to an inflation outlook that is already subject to upward pressures from tariffs and somewhat elevated inflation expectations

Moreover, "While Trump wants the Fed to slash its key borrowing rate by 3 percentage points, such a move could raise inflation expectations, causing fixed income investors to demand higher yields, "thereby increasing longer-term interest rates, weighing on the outlook for economic activity, and worsening the fiscal position," Feroli added, in this volatile climate

Additionally, For the time being, Powell and Co

Nevertheless, In contrast, Is expected to continue to conduct and make decisions based on data, with the constant drumbeat of Trump serving as a distraction that doesn't seem it will go away, even if the president ultimately never tries to fire the Fed chief (something worth watching) (this bears monitoring), in today's market environment. "Well, it isn't helpful to have the president be so aggressively antagonistic trying to pressure the Fed

It's not unprecedented that a president has views on monetary policy

We've seen that over time

But I think what's different this time is that it's been pretty persistent and unrelenting," former Cleveland Fed President Loretta Mester said Friday on CNBC

However, "That will not change how the Fed goes making its decisions on monetary policy. "watch now4:2404:24Former Cleveland Fed Pres

Mester: Unhelpful to have President Trump trying to pressure the FedSquawk Box.