Trump weighs firing Fed Chair Powell, but Treasury's Bessent warns of market mayhem: Report

With the Fed expected to begin cutting interest rates later this year, Bessent also argued that there may be no policy-driven reason to oust Powell at this stage.

US Treasury Secretary Scott Bessent has privately advised US President Donald Trump against firing Federal Reserve Chair Jerome Powell before his term ends next spring, warning that such a move could unleash economic fallout, legal challenges, and political backlash, The Wall Street Journal reported, citing sources familiar with the matter.

The caution from Bessent contrasts with growing criticism from other Trump allies, who are ramping up public pressure on Powell over interest rate decisions and the Fed’s controversial $2.5 billion headquarters renovation.

Market risk and legal chaos loom over potential ouster

According to the WSJ report, Bessent told Trump that removing Powell now could rattle financial markets, undermine the central bank's independence, and plunge the administration into uncharted constitutional and legal territory.

With the Fed expected to begin cutting interest rates later this year, Bessent also argued that there may be no policy-driven reason to oust Powell at this stage. His comments aim to temper Trump’s frustration, which has resurfaced sharply in recent weeks.

Trump allies escalate criticism, focus on Fed renovation

Despite Bessent’s warnings, other top Trump officials are intensifying attacks on Powell. Russell Vought, Director of the White House Office of Management and Budget, has accused Powell of 'gross mismanagement,' particularly targeting the Fed’s $2.5 billion renovation project.

Vought demanded answers from Powell about the cost overruns and scope of the Fed’s headquarters revamp. Powell, in response, emphasised transparency and accountability in a written reply:

“The Board believes it is of the utmost importance to provide transparency for our decisions and to be accountable to the public,” Powell wrote.

Legal showdown likely if Powell is removed early

Firing a Fed chair before their term ends is unprecedented in US history. Legal experts, as cited by WSJ, suggest it could spark a constitutional clash that may ultimately be decided by the Supreme Court. Under the Federal Reserve Act, the chair serves a four-year term, and any attempt to remove Powell prematurely would likely be challenged in court.