Trump calls on Powell to leave early, can the President of the United States dismiss the Chairman of the Federal Reserve (FED)?

The relationship between U.S. President Trump and The Federal Reserve (FED) Chairman Powell has deteriorated significantly, posing great risks to the global financial markets.
According to Xinhua News Agency, Trump again pressured Powell on April 17, demanding that The Federal Reserve (FED) immediately cut interest rates. On that day, Trump posted on the social media platform "Truth Social" that Powell's actions are always "too late and wrong." He stated that Powell, who has moved too slowly, should have cut rates like the European Central Bank long ago, and now he should cut rates immediately, as Powell "should leave as soon as possible."
The Federal Reserve (FED) is facing an unusually difficult balancing act due to Trump's tariff policy. If it cuts interest rates to buffer against the rising risks of economic recession, it may worsen inflation; if it maintains stable interest rates to keep inflation levels, it may harm growth.
During his two terms, Trump repeatedly criticized The Federal Reserve (FED) and pressured Powell to lower interest rates. Powell has repeatedly emphasized that the Federal Reserve will maintain its policy independence, and policy adjustments need to be based on economic data rather than political interference.
U.S. President Trump and The Federal Reserve (FED) Chairman Powell. Visual China file photo.
However, it is very difficult for the US president to fire the chairman of the Federal Reserve, and the Supreme Court is expected to intervene in such cases. Previous jurisprudence has shown that differences of opinion on policy can hardly justify dismissal.
The "Humphrey Executor" case of 1935
On the 16th, Powell stated that Trump has no right to dismiss him, "The independence of The Federal Reserve (FED) is a legal issue."
However, The Wall Street Journal believes that this does not mean Trump will not attempt it, as he has tried to remove other officials appointed by the executive branch, who are typically considered irremovable for policy reasons.
Many constitutional scholars believe that it is difficult to dismiss the chair of The Federal Reserve (FED), and this will almost certainly be resolved by the Supreme Court. Since the Supreme Court has not yet made a ruling on this, it is impossible to determine what will happen.
The Federal Reserve governor is nominated by the president and confirmed by the Senate for a term of 14 years, with one person serving as chair for a term of 4 years. According to the Federal Reserve Act revised in 1935, the president can remove a Federal Reserve governor "for cause." The regulations do not define the reasons for removal, but it is generally considered to be for "inefficiency, neglect of duty, or misconduct."
This regulation is related to a historical case known as "Humphrey's Executor," in which the ruling stated that the president cannot remove the head or board members of a regulatory agency due to policy disagreements.
In 1933, then-President Franklin D. Roosevelt attempted to dismiss Federal Trade Commission member William Humphrey on the grounds of opposing the New Deal. Humphrey subsequently filed a lawsuit but passed away the following year. In 1935, the Supreme Court ruled in favor of Humphrey, and the case is known as the "Humphrey's Executor" case.
In the same year, the U.S. Congress restructured the Federal Reserve (FED), and lawmakers established a 14-year term for the members of the Federal Reserve Board based on the ruling of the "Humphrey's Executor" case to shield them from direct pressure from the President.
In 1965, then-President Lyndon Johnson, after a dispute with then-Federal Reserve Chairman William McChesney Martin, asked the Department of Justice whether he could legally dismiss a member of the Federal Reserve Board. His lawyer responded that policy differences did not constitute just cause for dismissal.
Trump challenges the case precedent
Legal scholars are concerned that if the "Humphrey's Executor" case is successfully overturned, the position of the Chair of the Federal Reserve (FED) may be more easily challenged. In fact, Trump is challenging this precedent.
In February of this year, the Trump administration stated that the Supreme Court should overturn the case because it infringed upon the president's control over the executive branch.
Trump subsequently fired a Democratic member of the National Labor Relations Board and a member of the Merit Systems Protection Board in order to force the overturning of this precedent.
Two Democratic members have filed lawsuits, claiming that their dismissal was illegal. Chief Justice John Roberts has issued a ruling to temporarily suspend the reinstatement of the two while awaiting the Supreme Court's review of the case. The justices may first rule on whether the plaintiffs should be reinstated before ruling on the merits of the case. Currently, the conservative-majority U.S. Supreme Court is skeptical about the "Humphrey's Executor" case.
Powell stated in his speech on the 16th that he believes the upcoming decision will not apply to The Federal Reserve (FED). Moreover, there may be a way to challenge the dismissal of the chairman of The Federal Reserve (FED) without violating the precedent set in 1935.
Some scholars believe that even if the judges overturn the "Humphrey's Executor" case, they will find ways to protect the Federal Reserve (FED). Otherwise, the central bank would become a fundamentally different institution.
The importance of central bank independence
The independence of a country's central bank lies in the fact that elected leaders often trade off inflation for strong growth and low interest rates. Studies have found that after the central bank gains independence, inflation rates tend to be lower. For example, the case of the Bank of England shows that when the institution gained independence in 1997, its expected inflation rate decreased by about 1 percentage point. The mission of the Federal Reserve (FED) is to ensure low inflation and full employment.
The Wall Street Journal pointed out that monetary policy involves countless judgments, and the Federal Reserve chairman, who is concerned about his position, may distort these judgments to protect himself. Moreover, unlike other U.S. presidents, Trump is challenging the independence of U.S. regulatory agencies, and any of his comments will quickly be reflected in market pricing. If he calls for lower interest rates or a depreciation of the dollar, the market will worry that the Federal Reserve will heed his advice.
Due to the remarks and actions of The Federal Reserve (FED) officials having repercussions in global markets, they use objective data such as inflation, unemployment rates, and financial prices as the basis for decision-making, so that investors can infer how new information will impact monetary policy.
"If the independence of The Federal Reserve (FED) disappears, the thought process of market participants will become more complicated, as they will need to consider the political situation," said David Wilcox, a former FED economist at the Bloomberg Economics Research and the Peterson Institute for International Economics.