Macro Notes - Trump v. Powell

July 17, 2025

Bipan Rai

Managing Director, Head of ETF & Structured Solutions Strategy

Can Trump fire Powell?

Depends on which role we’re talking about.

Remember that Powell has three roles of relevance at the Federal Reserve:

a) Chair of the FOMC

b) Chair of the Board of Governors

c) A member of the Board of Governors

For a), the FOMC determines which board member occupies this seat (not the President). The role has traditionally gone to the person who holds b). Trump cannot remove Powell from this role per se.

For b), it’s legally uncertain if Trump can remove Powell from this role. Having said this, legal precedent is NOT on Trump’s side.

For c), Trump can remove Powell but only with just cause. That is exactly why there is so much focus on the Fed’s building renovations right now – because it could be used as pretext by the President (very loosely we might add) to remove Powell.

But if it happens – how much does it matter?

The FOMC could just pick someone else to be its Chair. Additionally, the FOMC Chair cannot unilaterally set monetary policy. The Federal Reserve Act is clear that this must be done by majority vote of the FOMC (not by the Chair). Any candidate that Trump picks would still have to corral the necessary votes for a policy direction.

Powell’s term as Fed chair ends in May 2026. The spread between the March 2026 SOFR contract and the June 2026 contract is now close -25bps. At the margin, this suggests that the market sees the next Fed Chair as immediately opting for a rate cut. But as mentioned above, that might not be the slam dunk trade that most think it should be.

Chart - SOFR Futures: June 2026 contract minus March 2026 contact

Source: BMO GAM, Bloomberg

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