Key Takeaway: Due to legal protections safeguarding the Federal Reserve’s independence, it would be extremely difficult for President Trump to directly influence its policy decisions in the short term.
President Trump became famous for coining the term “You’re fired!” on his reality TV show The Apprentice. Recently, he has caused volatility in U.S. interest rate markets by threatening to fire Federal Reserve Chairman Jerome Powell due to disagreements on monetary policy. This article addresses in detail the question of whether President Trump can effectively influence the Federal Reserve and U.S. interest rates.
Why Influencing the Fed Isn’t Easy
The Federal Reserve Act established a seven-member Board of Governors serving staggered, single fourteen-year terms ending on fixed dates (January 31 of even-numbered years). Governors can only be removed “for cause,” a legal standard defined by the landmark 1935 Supreme Court ruling in Humphrey’s Executor as misconduct or incapacity—not mere disagreements over policy. The Fed Chair holds an additional four-year leadership role appointed by the president and confirmed by the Senate, yet enjoys the same protection from removal as other governors. No modern precedent exists for removing a Fed governor or chair, and every credible legal analysis indicates that any removal attempt would immediately face a court challenge.
Currently, Jerome Powell’s term as Fed Chair runs until May 15, 2026, while his governorship lasts until January 31, 2028. Other governors’ terms also extend well beyond President Trump’s current term: Adriana Kugler (2026), Christopher Waller (2030), Michael Barr (2032), Michelle Bowman (2034), Philip Jefferson (2036), and Lisa Cook (2038). These statutory dates significantly limit how rapidly a White House administration can reshape monetary policy without violating legal constraints.
President Trump, Therefore, Faces Two Primary Paths:
Option 1: Direct Confrontation (Firing or Demoting Powell)
The most drastic move would be for Trump to either demote Powell from his role as Chair or attempt to dismiss him outright. On April 21, President Trump suggested publicly via social media that Powell’s “termination cannot come fast enough,” immediately rattling markets: the dollar index fell, ten-year Treasury yields rose, and S&P 500 futures fell nearly 2%. The following day, when Trump indicated to reporters that he had “no intention” of firing Powell, the markets quickly reversed—highlighting how sensitive global financial markets are to even perceived political interference.
Legally, a dismissal would be complicated. Trump’s administration could argue the four-year chairmanship is distinct from the fourteen-year governorship, potentially exempting it from the protections outlined in Humphrey’s Executor. Powell would likely challenge this immediately, relying on historical precedent that a Senate confirmation implicitly conveys “for cause” protection. Kiplinger’s April 22 legal analysis noted that similar issues are already pending before the Supreme Court, which could soon clarify or modify the current standards. If the Supreme Court maintains existing precedent, Trump’s efforts would stall. If it weakens or overturns that precedent, presidential influence could, for the first time, extend substantially into the Fed.
Even if Trump prevailed in court, the victory would come at a substantial economic cost. Former Boston Fed President Eric Rosengren warned that undermining Fed independence could cause the U.S. to “trade like a third-world country,” increasing risk premiums required by foreign investors.
Option 2: Gradual Influence via Appointments and Timing
The quieter but more feasible strategy involves leveraging existing vacancies and term expirations. On February 1, 2026, Governor Adriana Kugler’s term ends, presenting Trump with a chance to appoint a like-minded successor, pending Senate approval. Three months later, Powell’s chairmanship expires, giving the president the option to appoint an existing Republican governor—such as Christopher Waller or Michelle Bowman—as Chair without removing anyone outright. Such a move would substantially influence Fed messaging, press conference tone, and the influential “dot plot” forecasts that shape market expectations. Additional vacancies due to resignations or scheduled expirations would require multiple presidential terms to appoint a majority of governors, firmly steering monetary policy.
The market impact of such a gradual takeover depends heavily on investor perceptions. Markets gauge central bank reaction functions through Fed communications, voting patterns, and public statements. A dovish chair could shift market expectations toward easier monetary policy even before achieving a formal majority. Conversely, if a new Chair is perceived as overly influenced by political interests, bond markets might price in higher overall risks and interest rates.
The Bottom Line:
A U.S. president cannot unilaterally set interest rates but can threaten, litigate, and strategically appoint governors. Given Canada’s tight correlation with U.S. rates, any erosion of Fed independence swiftly becomes a Canadian financial issue. But in reality, it would be extremely difficult for President Trump to directly influence Federal Reserve decisions due to legal safeguards protecting its independence.