Trump-Powell Feud Heats Up: Odds Of Fed Chair Ouster Spike

A political firestorm erupted on Wall Street Wednesday as speculations surged that President Donald Trump could fire Federal Reserve Chair Jerome Powell before his term ends, reigniting fears over central bank independence.

Powell's current term runs until May 2026. Legal scholars and market participants have long debated whether a sitting president has the authority to fire a Fed chair without evidence of misconduct—a move that would almost certainly spark a constitutional crisis and rattle global markets.

If Trump goes through with firing Powell, it would mark the first time in modern U.S. history that a president attempts to remove a Federal Reserve chair without cause.

On Kalshi, a CFTC-regulated prediction market platform, the probability of Powell being ousted by the end of 2025 has climbed to over 20%, its highest level since April.

This uptick in political risk comes after a New York Times report revealed that Trump had shown a draft letter firing Powell during a closed-door meeting with House Republicans.

Trump reportedly waved the letter in the Oval Office, polling GOP lawmakers on whether he should act.

While the president later claimed he had "no imminent plans" to remove Powell, he openly admitted, "I talked about the concept of firing him. I said, ‘what do you think?' Almost every one of them said I should."

Producer Inflation Softened In June

On Wednesday, the Trump-Powell feud escalated further after the latest Producer Price Index (PPI) report revealed that inflationary pressures are continuing to ease.

U.S. producer prices were flat in June, missing estimates for a 0.2% gain and down from a 0.3% increase in May. The decline was driven by a 0.1% drop in services costs, with a sharp 4.1% fall in traveler accommodation services leading the slide. Prices also declined in retail auto parts, airline fares, and food and alcohol wholesaling.

Goods prices rose 0.3%, mainly due to an uptick in communication equipment, gasoline, electricity, and some food items. On a year-over-year basis, PPI cooled to 2.3%—its slowest pace since September 2024—while core PPI came in flat for the month and slowed to 2.6% annually, both below expectations.

Accusations Over $2.5 Billion Fed Renovation

Adding fuel to the fire, Trump and his allies—including Federal Housing Finance Agency Director Bill Pulte—have started targeting the Fed's $2.5 billion renovation project, suggesting it may provide grounds for Powell's removal "for cause."

In a post on X, Pulte wrote: "Who spends $2.5 billion on a renovation? I believe there is strong legal basis to terminate Jerome Powell, and for cause. He has destroyed the independence of the Fed."

A day earlier, Treasury Secretary Scott Bessent said on Bloomberg TV that a "formal process" has begun to identify Powell's successor, though he later clarified that firing Powell was "highly unlikely unless he has to leave for fraud."

Who Might Replace Powell?

As speculation builds over Powell's possible removal, attention is quickly turning to who could take the helm at the Fed.

According to Kalshi odds, Kevin Hassett leads the field with a 34% chance of being nominated, followed by Kevin Warsh at 32%, Christopher Waller at 18%, and Treasury Secretary Scott Bessent at 14%.

Each candidate brings a different policy stance, with both Hassett and Warsh seen as more aligned with Trump's preference for looser monetary policy—a stance that could significantly shift the Fed’s current trajectory if Powell is ousted.

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Image created using artificial intelligence via Midjourney.