Jerome Powell is the chairman of America's Federal Reserve. Donald Trump has called him a "major loser" and a "bad person", accusing him of keeping interest rates "artificially high", and in April 2025 threatened to sack him before backing down. Trump has argued that the president can under law fire the Fed chair over policy disagreements, but this would almost certainly be fought in the courts, including by Mr Powell himself. A new Fed chair is to be appointed when Mr Powell's second statutory four-year term ends in May 2026; Mr Powell could choose to stay on the Fed's board under a new chair until his term as a governor ends in 2028—a possibility with precedent that he has not publicly ruled out. The front-runner to succeed him is Kevin Warsh, a mainstream candidate known as an inflation hawk who must be confirmed by the Senate, though by late August 2025 betting markets favoured Christopher Waller.
On August 25th 2025 Donald Trump attempted to fire Lisa Cook, a Federal Reserve governor, over alleged mortgage fraud—the first time a president has used the power to sack a Fed official "for cause". Ms Cook has refused to resign. Adriana Kugler, another Fed governor, resigned separately. If Ms Cook were successfully replaced, four of the seven Fed governors would be Trump appointees. The governors hold a vote every five years to approve regional Fed branches' choice of presidents, with the next vote due in early 2026. A rotating cast of five regional presidents rounds out the 12-person FOMC, which sets interest rates.
Mr Trump has publicly demanded interest-rate cuts and dubbed Mr Powell "too late" for failing to provide them. He has toyed with sacking Mr Powell and for a spell tried to use the costly renovation of the Fed's headquarters as a pretext. The last president to try seriously to fiddle with the Fed was Richard Nixon, who leant on Arthur Burns, then chair, to lower interest rates ahead of the 1972 presidential election—a calamitous move, as inflation rose even before the oil shock of 1973 and took another decade to contain. Thomas Drechsel of the University of Maryland estimates that a bout of political pressure about half as intense as the Nixon effort, applied for six months, could raise prices by 7% over a decade.
The bookies' favourite to succeed Mr Powell is Christopher Waller, a Fed governor who dissented in favour of a rate cut at the last monetary-policy meeting. Mr Waller predicted against consensus that America could cool inflation without a recession. By early 2026, however, Kevin Hassett—who headed Trump's National Economic Council—had become the clear front-runner, with prediction markets assigning a more than 70% chance to his appointment.
In February 2026 Donald Trump nominated Kevin Warsh to succeed Mr Powell. Mr Warsh, who last served on the Fed's board 15 years ago, has called for no less than "regime change" at the central bank. Despite his earlier hawkishness, he has recently adopted a doveish stance, calling for rate cuts. Mr Powell will need to decide whether to step down from his governor's seat—which runs until 2028—or stay on the board under Mr Warsh, as some predecessors have done.
On April 24th 2026 the Department of Justice dropped its case against Mr Powell, after Thom Tillis held up Kevin Warsh's confirmation to force the climbdown. Mr Powell said on April 29th that he would stay on as a governor after handing over the chairmanship to Mr Warsh—a break from convention, as no recent chair has remained after their term at the top expired. He can serve until 2028. The three Biden-appointed governors are also staying put, lest Trump appoint lackeys. Given Trump's penchant for meddling, a former Fed official has called it "critically important" that they all stay.
On January 9th 2026 the Department of Justice served subpoenas on the Federal Reserve relating to a probe into the cost of renovating the central bank's headquarters. On January 11th Mr Powell responded with a spirited video denouncing the probe, declaring with uncharacteristic ardour that it was the result of the Fed setting policy based on sound economics "rather than following the preferences of the president." He said he was under threat of a criminal indictment.
The pushback was swift and broad. Mr Trump disavowed involvement, telling NBC News: "I don't know anything about it." Several Republican senators on the banking committee objected. Thom Tillis said he would block any Fed nominations until the matter was resolved. John Kennedy remarked that "we need this like we need a hole in the head." Former treasury secretaries and Fed chairs of both parties signed an open letter defending the Fed. A dozen foreign central bankers, including Christine Lagarde and Andrew Bailey, signed another. Jamie Dimon, boss of JPMorgan Chase, said anything that chips away at Fed independence "is probably not a great idea."
Markets' reaction was muted. Equities hardly moved. Crucially, yields on long-dated Treasuries barely budged. Mr Powell could opt not to vacate his committee post when his chairmanship ends in May, staying on as a governor until 2028, rather than step down as his predecessors did.
At the Fed's annual Jackson Hole conference in August 2025, Emi Nakamura of the University of California, Berkeley presented research showing that the Fed has frequently deviated from the Taylor principle—the idea that interest rates must rise by more than any increase in inflation above the 2% target—over long periods. Central banks often ignore disturbances, trusting inflation will return to target. The more credible the bank, the better this works.
Ludwig Straub of Harvard University presented research showing that older people's appetite to amass and maintain wealth raises demand for assets including Treasuries, potentially lowering the natural rate of interest enough for America to run up debts worth 250% of GDP by the end of the century. Mr Straub cautioned that this applied only in 2100, not today, and stressed that "we need a massive fiscal adjustment no matter what."
On July 30th 2025 two Fed governors, Christopher Waller and Michelle Bowman, voted against the majority decision to keep interest rates unchanged at 4.25-4.5%, preferring to cut by a quarter point. It was the first double dissent by governors on the Fed's board in more than 30 years. Both were appointed in the first Trump administration. Waller gave a speech entitled "The Case for Cutting Now" a fortnight earlier; betting markets put his odds of succeeding Powell at 17%. Bowman had previously dissented in 2024, arguing hawkishly that rates should not fall too fast. Despite the split, investors followed Powell's lead: his hawkish remarks shifted expectations for a September cut from a two-thirds probability to less than half.
The Fed was created by the Federal Reserve Act in 1913. It operates with "instrument independence", meaning it can raise or lower interest rates or buy and sell Treasuries without interference from the White House or prior approval from Congress. Governors are appointed for 14-year terms on a staggered basis and can be removed by the president only "for cause"—often defined as inefficiency, neglect or malfeasance—to ensure they cannot be fired over policy disagreements. This protection for independent agencies was upheld by the Supreme Court in the Humphrey's Executor case in 1935.
Monetary policy is set by the Federal Open Market Committee (FOMC), which comprises seven presidentially appointed and Senate-confirmed governors and five of the presidents of the 12 Federal Reserve district banks. The district bank presidents are selected by the commercial banks in their districts, not the president. The chair casts just one of 12 votes, limiting any individual's power.
On May 22nd 2025 the Supreme Court allowed Trump to dismiss members of the National Labour Relations Board and the Merit Systems Protection Board without showing "cause", but rejected the argument that its decision "necessarily implicates" the Fed, calling the central bank a "uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States".
Life being what it is, one dreams of revenge.