Trump wants to "fire" Powell? What is the impact on the crypto market?

Powell did not convey any signals of interest rate cuts at yesterday’s Chicago Economic Club event. The most anxious person is none other than Trump.

The president, after over a month of turmoil regarding tariffs, is clearly enraged by the Federal Reserve’s decision not to lower interest rates and has continuously launched fierce attacks on Powell: “If I ask, Fed Chairman Powell will resign. I am not satisfied with him (Powell). I think Powell has not done a good job.” “Powell is slow to react and sluggish in action.” “Powell is playing politics; interest rates should be lowered now.” “The people at the Fed are not very smart, and Powell is terrible.” Powell is “someone I have never really liked.” Meanwhile, Powell staunchly defends the independence of the Federal Reserve, rebutting political interference, and states that the Fed will make decisions based solely on what is most beneficial for the American people.

Trump Challenges the Independence of the Federal Reserve

Trump never hides his disappointment with Powell. On April 17, 2025, he told reporters in the Oval Office, “If I want him gone, believe me, he will be gone soon!” Then, he posted again on Truth Social urging Federal Reserve Chairman Powell to cut interest rates, “The European Central Bank is about to cut rates for the seventh time, while the Federal Reserve’s ‘Mr. Always Late’ Powell has messed everything up again. Yesterday he threw out a typical chaotic report - oil prices are falling, food prices are dropping, even eggs are getting cheaper, and America is making a fortune through tariffs. This ‘slowpoke’ should have cut rates like the European Central Bank a long time ago, and now it’s more urgent than ever, Powell’s countdown to resignation should be accelerated!”

Trump’s anger mostly stems from Powell’s “conservative” attitude towards monetary policy. He believes that Powell failed to significantly cut interest rates in a timely manner, missing the window for stimulating economic growth. What frustrates Trump even more is that the Federal Reserve’s high interest rate policy conflicts with the tariff plans he implemented after taking office. Trump’s tariff policy aims to protect American industries, but it could raise the prices of imported goods, thereby exacerbating inflationary pressures. The Yale University Budget Lab estimates that these tariffs amount to an additional $4,900 in actual tax burden for each American household. In this context, Trump hopes the Federal Reserve will alleviate economic pressure by lowering interest rates to “safeguard” his policies.

As for whether Trump wants to fire Powell, although he publicly stated to reporters that he “does not regret nominating Powell,” there may be clues in the WSJ report. Sources say that Trump has privately discussed the possibility of replacing Powell with former Fed Governor Kevin Warsh.

What are the obstacles to firing Powell?

Can Trump really “fire” Powell as he wishes? The answer is not simple.

According to the Federal Reserve Act, the Chair and members of the Federal Reserve can only be dismissed “for cause,” typically referring to misconduct, malfeasance, or loss of capacity to perform their duties, rather than policy disagreements. Historically, no Federal Reserve Chair has ever been directly removed by the President, and this legal framework provides a solid guarantee for the independence of the Federal Reserve. Powell himself has made his stance clear. In November 2024, when asked if he would comply if Trump asked him to resign, he replied emphatically: “No.”

In addition, Powell’s term also provides him with protection. He was initially nominated by Trump to serve as the Federal Reserve Chairman in 2017 and was re-nominated by Biden in 2022, with his chairmanship lasting until May 2026. Brookings senior fellow Sarah Binder pointed out that courts typically do not view disagreements over interest rate settings as “just cause,” so if Trump were to forcibly dismiss Powell, he could face legal challenges.

Even if the law permits, firing Powell is politically risky. The independence of the Federal Reserve is not only a legal issue but also the cornerstone of market confidence. Binder warns that if the president tries to oust Powell, it will increase market uncertainty and shake public trust in the Federal Reserve. This could lead to severe volatility in the stock and bond markets, and even affect the cryptocurrency market. After all, although crypto assets claim to be “decentralized,” their prices are still heavily influenced by the macroeconomic environment and investor sentiment.

Trump’s aggressive behavior has even raised concerns among some critics of Powell. Senior Democratic Senator Warren stated that undermining the independence of the Federal Reserve could trigger a market crash.

Although there are two “amulets” of law and market, it does not mean that Powell’s position is not threatened at all. Recently, the U.S. Supreme Court is hearing a case involving the president’s power to dismiss senior officials of independent agencies. Although the case does not target the Federal Reserve but rather the National Labor Relations Board and the Merit Systems Protection Board, the ruling may provide legal grounds for Trump. Although the 1935 “Humphrey’s Executor v. United States” case established a precedent that limits the president’s ability to dismiss leaders of independent agencies without cause, the current conservative Supreme Court may reconsider this ruling. If the court tends to expand presidential power, Powell’s position may indeed be in jeopardy.

In addition, Powell’s support is not unbreakable. Compared to Trump’s first term, Powell faces more scrutiny now. Some believe that the Federal Reserve’s actions to curb inflation in 2022-2023 were too slow, leading to policy mistakes. Allies within the White House feel that Trump’s post on Thursday morning was more an attempt to disrupt Powell’s position and to frame him as a future “scapegoat for economic issues,” which could weaken his public support and increase the risk of being replaced.

How does it affect the crypto market?

Perhaps firing Powell is not the most critical issue; for Trump, the goal this time seems to be to pressure the Federal Reserve to “open the floodgates” and significantly lower interest rates to stimulate economic growth.

Interest rate cuts typically mean increased liquidity, decreased purchasing power of the dollar, and rising inflation expectations. In this environment, cryptocurrencies, especially Bitcoin, known as “digital gold,” can attract capital inflows. Looking back at 2020, the Federal Reserve cut interest rates to near zero in response to the pandemic, and the price of Bitcoin soared from less than $10,000 to $67,000 by the end of 2021, setting a historical high. A similar scenario may unfold again under Trump’s pressure for interest rate cuts.

In addition, Trump’s tariff policy may further drive up inflation. According to Powell’s warning, tariffs could lead to higher prices for imported goods, squeezing household budgets and raising prices. Estimates from Yale University show that the inflation effect of tariffs is equivalent to an actual tax burden increase of $4,900 per household. Under inflationary pressure, investors might shift their funds to mainstream cryptocurrencies like Bitcoin, or even chase high-risk altcoins, igniting a wave of bullish market enthusiasm.

Furthermore, if the Federal Reserve loses its independence under political pressure, the credibility of U.S. monetary policy may be compromised. DeFi and blockchain technology serve as a remedy for the flaws of the traditional financial system. If the Federal Reserve becomes politicized, it could accelerate investors’ disappointment with the dollar system and drive funds into ecosystems like DeFi.

However, lowering interest rates is not a panacea. Powell warned in his speech yesterday at the Chicago Economic Club that Trump’s tariff policy could push the U.S. economy into a “stagflation” dilemma—high inflation coexisting with slow economic growth. This environment will make the Federal Reserve’s dual mandate (stabilizing prices and maximizing employment) extraordinarily complex.

In a stagflation environment, the Federal Reserve may face a dilemma: cutting interest rates to stimulate the economy could exacerbate inflation, while maintaining high rates may suppress growth. For the cryptocurrency market, this means severe price volatility.

The game between Trump and Powell may ultimately evolve into a no-win war of attrition, with the casualties being market confidence and economic stability. History tells us that the cost of political intervention is often paid by the wallets of ordinary investors and supermarket bills.