Jerome Powell’s Fed term is coming to an end: This is the process to replace him when the job opens up

On Wednesday, July 15, The New York Times reported that President Donald Trump had drafted a letter firing Federal Reserve Chair Jerome Powell and sought the advice of Republican leaders on whether he should take the unprecedented step.

Before his election, then-candidate Trump had harsh words for Chair Powell, whom he appointed to his first term as head of the Fed during his first administration. President Joe Biden later appointed Powell to another term, which is set to expire in May 2026. During an Oval Office meeting with the Crown Prince of Bahrain, Trump was asked about Powell’s future at the Fed. He largely dodged the question but stated that he was “surprised he was appointed,” continuing that he was “surprised Biden put him in and extended him.”

The rationale being given by the White House relates to a report from the Office of Management and Budget, led by Russel Vought, which found that the Federal Reserve had overspent its renovation budget by $2.5 billion. The president also said in the Oval Office on Wednesday that he was “planning on doing anything,” adding that Powell might have “to leave” because of “fraud.” Accusing Powell of fraud could be used as a pretext for his firing—one that could still be found legally unjustifiable.

Trump has made clear that Powell will not be reappointed, and now, he could cut his tenure short altogether, placing a loyalist in the role—a move legal analysts warn could be illegal under federal law.

Since taking office in January, the president has grown increasingly frustrated with Powell, arguing that he should cut interest rates, citing low levels of inflation in the U.S. economy. However, Powell has warned in recent months that the Federal Open Market Committee (FOMC) has agreed to keep the federal funds rate at its current effective rate of 4.3, as many members expect inflation to increase as the impact of tariffs takes effect. By cutting rates, some economists argue, the Fed would be creating more inflationary pressure in the economy, which the central bank cannot allow, based on its Congressional mandate to keep inflation low, with the goal of average price increases not exceeding 2 percent annually. The other component of the Fed’s mandate is to implement monetary policy that supports full employment—meaning that those who want a job can find one.

Though consumer prices had not seemed affected by the White House’s sweeping tariffs, June reports are showing signs that shoppers will soon begin to see higher prices—particularly in markets heavily dependent on imports. The Bureau of Labor Statistics’ Consumer Price Index report for June showed prices increased by an average of 0.3 percent, rising to a year-over-year boost of 2.7 percent. A similar report from the BLS on producer prices found a comparable increase. Indications that inflation could once again take hold in the U.S. economy would likely mean maintaining the federal funds rate at its current level—or even taking the dramatic step of increasing it further. Such a prospect appears to have rattled the White House, as evidenced by the news that Powell could be fired.

Who could replace Jerome Powell?

Though the president has yet to take the dramatic step of firing Powell, names of possible replacements are already circulating. The candidate would have to be approved by the US Senate, which could limit the White House’s options.

Secretary of the Treasury Scott Bessant has been floated by the president, as he clearly has Trump’s trust and support and has played a critical and public role since January.

As tariffs have been imposed on some of the U.S.’s largest trading partners, Secretary Bessant has made dozens of media appearances defending the policy and strategy, which has been marred by sudden changes and backtracking that has led Wall Street to largely ignore the threat. The S&P 500 has hit historic highs, as many companies could see profits increase substantially—if tariffs cut into their bottom line and they choose not to pass the cost on to consumers. If the cost of tariffs is passed along, consumption will likely dip, as households pay more of their income in what amounts to a sales tax.

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