Unclear Legal Outlook For Reported Trump Fed Independence Plans

WSJ published a widely-shared reportyesterday claiming that Donald Trump’s allies “are quietly drafting" proposals to erode the Federal Reserve’s independence, if Trump secures a second term.

• According to the Journal, a 10-page document outlines proposal ranging from, "incremental policy changes to a long-shot assertion that the president himself should play a role in setting interest rates.”
• The advisors argue Trump would have, “the authority to oust Jerome Powell as Fed chair before his four-year term ends in 2026… though Powell would likely remain on the Fed’s board of governors.”
• However, while generating significant market interest, there is little consensus on either Trump's ambitions, or his authorization should he pursue the proposals.
• The Brookings Institution probed the question of Trump removing Powell in 2019, concluding that “inefficiency, neglect of duty, or malfeasance,” are likely the only justifications noting, policy differences are probably not enough, "but the Supreme Court could ultimately decide that question differently."
• Brookings concluded in 2019 such an action was unlikely and Congress could stake out a position which forced stability. However, since then polarisation in Congress has deepened, Trump has added an additional conservative justice to SCOTUS, and the court has appeared more willing to wade into political territory, most notable with the Dobbs ruling on abortion in 2022. Trump has also signaled that he intends to concentrate far greater power in the executive than his first term.
• It is hard to say definitively whether Trump could remove Powell. If he were to do so, he would likely have to promote an existing board member to chair - likely one of his appointees Miki Bowman or Chris Waller - or attempt a wholly more dramatic exertion of executive power.