Trump Threatens to Fire Powell Over Fed's Costly Renovation

U.S. President Donald Trump said the Federal Reserve's $2.5 billion renovation plan might be grounds for firing its chairman, Jerome Powell, in a fresh escalation of his ongoing attack on the central bank chief.

"I think he's bad… but I never thought he'd spend $2.5 billion to expand the Fed," Trump told reporters. He added that talking to Powell was like "talking to a chair" due to his lack of personality.

When asked whether that constituted a dismissible offense, Trump said: "I guess it does."

For months, Trump has criticized Powell, demanding interest rate cuts. However, Fed officials have held interest rates steady throughout this year, much to Trump's displeasure. These attacks have raised concerns about the potential erosion of the data-driven Federal Reserve's independence.

The Importance of Central Bank Independence

Markets favor independent central banks, where monetary policymakers set interest rates based on data and a clear mandate, rather than being swayed by the political considerations of politicians.

"The independence of the Fed is critically important, not just for the current chair whom I respect, but for the next chair as well," JPMorgan Chase CEO Jamie Dimon, one of Wall Street's most recognizable leaders, told reporters on a conference call Tuesday morning.

"Manipulating the Fed often has dire consequences, completely contrary to what you want to achieve," he added.

Trump acknowledged that his more personal pressure on Powell had not yielded the interest rate cuts he desired. The Fed's renovation project became a new target for his recent attacks on Powell.

The Controversial Renovation Plan

Powell had previously asked the Fed's Inspector General to conduct an additional review of the ongoing renovation project. Last month, some senators questioned Powell about the "luxurious renovation" of the Fed's Washington headquarters during a semiannual monetary policy hearing.

According to information from the Fed's website, the renovation project was approved by the Federal Reserve Board of Governors in 2017, with an initial budget of $1.9 billion in 2019, and work began in 2021. But due to "unforeseen conditions" (such as "higher-than-expected asbestos content, toxic soil contamination, and higher-than-expected groundwater levels"), costs have risen to $2.5 billion.

Trump has long been vocal about his displeasure with Powell, calling him a "fool," a "dummy," and so on. Powell has stated publicly that if it weren't for the impact of tariffs, the Fed would have cut interest rates this year, and that officials are waiting to monitor the impact of tariffs before deciding whether to cut rates.

But Trump remained unconvinced. "Our interest rates should be at 1%, "he said on Monday at a luncheon. "They should even be below 1%."