The president of the United States would probably have a hard time firing a Federal Reserve chair over interest rates.
But nobody is totally sure what would happen if he tried.
As a legal matter, it has been debated for decades but never tested. And it's a question that would become more than academic if Donald Trump wins this November and then moves to curtail Jerome Powell's independence or even tries to fire him outright.
The former president has previously claimed he can fire Powell, but legal experts aren't quite so sure.
For the moment, Trump appears more focused on his legal problems as some in his orbit remain keenly focused on the Federal Reserve issue. Trump himself has found time to discuss possible Powell replacements for 2025 or 2026, when Powell's term ends.
The latest development came this week with the revelation in the Wall Street Journal that a group of Trump allies outside of his formal campaign are drafting proposals that would severely undermine the Fed's independence if enacted.
In addition to an argument that Trump could fire Powell, there is also a debate among the former president's allies about how far to go. One "long shot" proposal reportedly under consideration even explosively argues that the president should have a direct say in the setting of interest rates.
Federal Reserve chairs have zealously guarded their independence for decades, with Powell often underlining that point. In a recent speech, he said, "We are going to do what we are going to do, and we will do it for economic reasons, and that’s it."
The political debate around Powell comes as the central bank weighs a complicated (and politically fraught) decision about when to begin cutting interest rates.
Read more: What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
It's not yet clear when that easing of monetary policy could begin; another hot inflation reading Friday reinforced the unlikelihood of any near-term cuts.
What is clear, however, is that Powell could be under unprecedented pressure if Trump prevails in November.
The (somewhat unsettled) legal question
For his part, Trump believes he has the authority. He reiterated the idea publicly in a 2020 news conference during the early stages of the coronavirus pandemic when he bluntly said, "I have the right to remove" Powell.
He added that he could also demote Powell from his position as chair, "put him in a regular position, and put somebody else in charge."
But Trump ended up declining to test either power with the courts.
At issue is Section 10 of the Federal Reserve Act. The law states that each member of the board shall hold office 14 years "unless sooner removed for cause by the President." The statute doesn't have any language that specifically addresses the chairman of the Board of Governors.
The question is what exactly constitutes "for cause"? The language in the law is plainly more restrictive than cabinet officials and other members of a presidential administration, who are often described as working "at the pleasure" of the president.
Legal experts have tended to say that a simple policy disagreement wouldn't rise to the level of cause, but it's a standard that hasn't been tested with a judge.
The issue was a topic of keen debate in 2018 and 2019 following reports that year that then-President Trump had floated the idea of firing Powell behind closed doors.
In a 2019 report on what might happen if he tries, Peter Conti-Brown of the Brookings Institution wrote that any president trying to simply fire a chair without charging malfeasance or neglect of duty would likely end up at the Supreme Court.
If the justices upheld such a firing, he wrote, "that would represent one of the biggest changes in administrative law in the United States in 80 years."
Conti-Brown also laid out a variety of market-rattling scenarios that could follow any presidential attempt to fire Powell from either his position as Federal Reserve chair or as a member of the Board of Governors.
One particularly striking scenario is one where Powell sues in response and is allowed to stay in his position as the case is considered in court.
In a recent exchange with Yahoo Finance, Conti-Brown said that the legal landscape remains the same as in 2019 and that the paper still represents his views.
Another look at the subject in 2019 from Robert Eisenbeis, Cumberland Advisors' chief monetary economist, was a bit more blunt. On the question of whether Powell could be fired, he wrote that it's a matter of some debate, but "the short answer appears to be no."
Would Trump try?
This week's news of the effort among Trump allies is just the latest example of officials in Trump's orbit debating whether to rein in Federal Reserve independence.
A book described as a "comprehensive policy guide for the next conservative US president" was published in 2023 by the influential Heritage Foundation as part of its own effort at planning if Trump wins, called Project 2025.
The book includes a chapter that looks at reducing the power of the Federal Reserve but stops short of advocating the removal of Powell.
Trump aides have long tried to downplay connections between the campaign and these groups. They maintain that the proposals shouldn't be taken as Trump's views, but the work is likely to be influential if there is a second Trump administration.
John McEntee worked in the Trump White House and is now involved in Project 2025. He said recently that when it comes to his efforts and the formal Trump campaign, they will "integrate a lot of our work with them" over the coming summer.
It was a fact the Biden campaign was more than happy to highlight. "The Project 2025 agenda is the Trump agenda," charged Biden-Harris 2024 spokesperson James Singer in a statement.
Whether or not Trump ultimately decides to listen to the more aggressive ideas among his allies, one thing that is clear is he will not give Powell a third term as chair when his current term expires in 2026.
"I would not reappoint him. I thought he was always late, whether it was good or bad, but he was always late," Trump has said.
Ben Werschkul is Washington correspondent for Yahoo Finance.
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