Bessent Warns White House Against Attempting to Remove Fed Chair Powell

Treasury Secretary Scott Bessent has issued strong warnings to White House officials regarding the potential consequences of attempting to remove Federal Reserve Chair Jerome Powell. According to Politico sitting sources close to the White House, who spoke on the condition of anonymity, Bessent cautioned that such an action could destabilize already shaky financial markets.

This warning comes as President Donald Trump’s frustration with Powell intensifies, particularly due to the Fed chair’s resistance to cutting interest rates in the near future. The sentiment was publicly expressed by Trump in a recent post on Truth Social, where he stated, “His termination cannot come fast enough!” However, for the moment, Powell’s position appears secure.

Any move to dismiss Powell—an action Trump considered during his first term—could exacerbate market instability, particularly in light of the ongoing turmoil caused by the administration’s trade policies. Investor confidence in the Federal Reserve’s independence is crucial for maintaining the U.S.’s reputation in global finance, and any politically motivated actions against Powell could undermine that trust.

White House allies interpret Trump’s remarks as an attempt to unsettle Powell rather than a straightforward call for his removal. They suggest the president may be positioning Powell as a scapegoat for future economic challenges while simultaneously increasing pressure on him to comply with Trump’s monetary policy preferences. However, Trump’s unpredictability remains a concern; those close to him warn that he could change his approach at any moment.

The White House declined to elaborate on Trump’s post, redirecting inquiries to the president’s comments. The Treasury Department did not respond to requests for further comment.

Currently, Powell appears to be taking a cautious approach concerning interest rates as he assesses the impact of tariffs on inflation and employment. Speaking in Chicago, he underscored the risk of facing both rising inflation and slowing growth—two challenges that complicate the Fed’s monetary policy toolkit.

As Trump continues to advocate for lower interest rates amid fears that his tariffs could trigger a recession, Powell and other Fed officials have opted to keep rates elevated to curb inflationary pressures. Market speculation indicates that the Fed may eventually lower rates in response to rising unemployment, even as tariffs contribute to inflation.

Trump’s dissatisfaction with Powell dates back to his first term when he appointed Powell as Fed chair. The central bank’s decision to raise interest rates multiple times in 2018 led Trump to contemplate firing Powell that December, a move that sent markets into a tailspin before he ultimately backed down.

Removing Powell would not only challenge the limits of presidential authority but also raise significant legal questions. Federal law stipulates that members of the Federal Reserve Board can only be removed “for cause,” typically interpreted as misconduct. This legal framework is designed to protect the Fed from political interference. The Trump administration is currently contesting similar restrictions regarding the removal of leaders in other independent agencies in a case pending before the Supreme Court.

Powell himself noted the uncertainty surrounding the implications of the Supreme Court’s ruling, emphasizing that it may not directly relate to the Federal Reserve. “That’s a case that people talk about a lot,” Powell remarked. “I don’t think that that decision will apply to the Fed, but I don’t know. It’s a situation that we’re monitoring carefully.”

Should an attempt to remove Powell take place, it would likely face immediate legal challenges. However, with only a year remaining in Powell’s term, some White House allies suggest that Trump may be inclined to simply wait him out.

In a surprising twist, Trump also expressed rare commendation for the European Central Bank (ECB), which recently cut its key interest rate from 2.5% to 2.25%. “The ECB is expected to cut interest rates for the 7th time,” he wrote, adding that Powell “should have lowered interest rates, like the ECB, long ago, but he should certainly lower them now.”