How Trump could use a building renovation to oust the Fed chair

WASHINGTON (AP) — President Donald Trump says he has finally found a way to achieve his goal of removing Federal Reserve Chair Jerome Powell, accusing him of mismanaging the U.S. central bank’s $2.5 billion renovation project.

The push comes after a monthslong campaign by Trump to try to rid himself of the politically independent central banker, who has resisted the president's calls to slash interest rates out of concerns about the administration's tariffs sparking higher levels of inflation.

The president indicated Tuesday that Powell’s handling of an extensive renovation project on two Fed buildings in Washington could be grounds to take the unprecedented and possibly legally dubious step of firing him. “I think it sort of is,” Trump said.

“When you spend $2.5 billion on, really, a renovation, I think it’s really disgraceful,” Donald Trump said, adding that he never saw the Fed chair as someone who needed a “palace.”

The project has been underway for years, going back to Trump’s first term. But it only recently caught the White House’s attention. Trump maintains that Fed rate cuts would lower the costs of government borrowing, while Powell has warned that a premature rate cut could worsen inflation and ultimately raise those borrowing costs.

The risk of the Fed losing its political independence could undermine America’s financial markets, possibly leading to a meltdown in stocks and investors charging a premium to lend to the U.S. economy.

Here’s what to know:

Ousting Powell risks setting off market panic

The Fed chair has been an obstacle in Trump's efforts to gain total control over the executive branch.

Powell and his board have the dual mandate of maximizing employment and keeping prices stable, a task that can require them to make politically unpopular moves such as raising interest rates to hold inflation in check. The general theory is that keeping the Fed free from the influence of the White House — other than for nominations of Fed officials — allows it to fulfill its mission based on what the economy needs, instead of what a politician wants.

An attempt to remove Powell from his job before his term ends in May 2026 would undercut the Fed’s long-standing independence from day-to-day politics and could lead to higher inflation, higher interest rates and a weaker economy.

The Supreme Court recently signaled that the president can’t fire Powell simply because Trump disagrees with him on interest rates. But legally he could do so “for cause,” such as misconduct or dereliction of duty.

Trump's workaround appears to be that Powell misrepresented the renovation project in congressional testimony and that the cost is excessive, thus meriting his dismissal.