Key takeout
The simmering tension between President Donald Trump and Federal Reserve Chairman Jerome Powell may be boiling.
Analysts say the White House may have laid the foundation for Trump to fire Powell. The Fed says its pre-World War II marble headquarters are in a “significant state of dishonor” due to asbestos contamination, outdated plumbing and old ventilation.
Trump’s main Qualm with Powell has not yet been renovated. That’s because the Fed has not succumbed to Trump’s repeated demand for interest rate cuts. The president cannot be fired the Fed’s chair on a whim, but analysts believe he can use the headquarters renovation as a reason to fire him “for a cause.”
“We must view this as a serious threat,” said Mark Spindel, co-founder of the Potomac River capital and co-author of a book on its relationship with Congress.
Spindel argues that the market remains a key guardrail for any attempt to drive Powell out, and points out that Congress and the courts are willing to postpone Trump for his second term.
But the market hasn’t moved much after Trump officials escalated the attack. That could change if Trump chooses to fire Powell and places the Fed under “extreme institutional obsessions.”
“As the Fed sits at the pinnacle of the global dollar currency system, it is clear that the results echo far beyond our boundaries.
Trump is considering a successor to Powell
Dust is the latest Powell in Trump’s saga, and he says he should cut interest rates to boost the economy and reduce interest costs for the US government. The Fed has not changed this year, citing ongoing risks to inflation.
Trump has long wanted to replace Powell, but he retreated the idea of firing him after sucking up the market earlier this year. Powell’s term as Fed chair ended in May 2026, giving Trump the opportunity to give him an alternative name.
Trump considered fired Powell or promoting that timeline by naming a successor ahead of time and giving opinions with investors.
According to the Wall Street Journal, the Powell replacement pool could be slimming down, with two candidates named Kevin standing at the top of the list.
One of them, Kevin Wahsh, joined the Federal Reserve Committee from 2006 to 2011, helping to shape the early response to the 2008 financial crisis. Another Kevin Hassett is the director of Trump’s National Economic Council and is a frequent spokesman for the administration’s economic policy.
Over the weekend, Hassett told ABC News that Trump’s authority to fire Powell is “under investigation” and that he could be fired for “certainly” reasons.
Another top White House employee, budget director Russell Vert, also pushed the Fed over the renovation costs. In a July 10 letter to Powell, Vought wrote that Trump is “very troubled by your management” for the Fed due to a “exaggerated overhaul” at headquarters.
Vought said the $2.5 billion renovation, including the Fed’s headquarters and the nearby Fed’s building, would cost about $700 million more than expected.
How does the Fed respond?
Axios reported Monday that Powell asked Fed inspectors to investigate the renovation.
In a FAQ recently posted to the website, the Fed said it “takes serious responsibility as a good manager of public resources.” The higher than expected cost is partly due to the more expensive materials and labor over time and the “unexpected condition” that contains more asbestos than expected toxic contamination in the soil.
The project will reduce costs over time by integrating the Fed’s footprint and reducing office space leased elsewhere.
“It includes a complete overhaul and modernization to preserve two historic buildings that have not been comprehensively renovated since construction in the 1930s,” the Fed FAQ also includes photos of asbestos repairs and flood damage.
The Fed said there was “no new VIP dining rooms” as part of the project, and that HQ’s meeting rooms have been used for mealtime meetings and have been renovated. The central bank also said there are no VIP elevators available only to the seven-member board of the Fed.
Investors see Powell’s firing as a low probability event, according to Ian Lyngen, BMO Capital Markets’ US rate strategy. In a typical political environment, renovation costs will not trigger removal, but “Washington is nothing, if not atypical,” Lingen wrote.
