(MENAFN- Gulf Times) US President Donald Trump is on a relentless campaign to pressure the Federal Reserve into cutting interest rates, which he considers far too high.
And Trump's enduring pressure on Jerome Powell is once again roiling markets and raising questions about what would happen next if the president fired the embattled Federal Reserve chair.
Such a move would be a first in US history and would almost certainly trigger a landmark lawsuit that would grip both Washington and the Wall Street and ultimately be decided by the US Supreme Court.
The latest turmoil erupted on July 16 amid reports that Trump was expected to move soon against Powell, who's been in the president's crosshairs for failing to heed his calls for lower interest rates.
Trump then pushed back on the reports, saying Powell's ouster was“highly unlikely, unless he has to leave” due to“fraud”.
That was a reference to cost overruns for renovations at the Fed headquarters, which Trump and his allies have been zeroing in on as a potential reason to fire Powell“for cause”.
The Supreme Court indicated in May that Trump can't simply fire Powell without any grounds. In letting Trump oust officials at two other agencies without having to give a justification, the court majority said the decision didn't mean the president wielded similar authority at the Fed.
The court called the central bank a“uniquely structured, quasi-private entity”. Still, the ruling left open the possibility that Powell could be fired for cause.
The Fed is in the midst of the first large-scale renovation of its two main buildings in Washington since they were built in the 1930s.
The renovation plans were first approved by the Fed's board in 2017. Since then, the price tag has swollen.
According to Fed budget documents for 2025, the overall cost estimate for the project has risen to $2.5bn, compared with $1.9bn in 2023.
A number of Trump allies have seized on the renovation in an apparent effort to build a case to justify firing Powell.
Matter-of-factly, removing the Fed chief wouldn't necessarily solve Trump's main beef with the central bank. He wants lower interest rates, but a new chair couldn't deliver that alone.
Rates are set by the Federal Open Market Committee, which is currently headed by Powell. The FOMC also has the ability to elect its own chair.
Investors value the Fed's status as an independent organisation. Without it, the central bank's pledge to keep inflation in check lacks credibility.
And a majority of respondents to the latest Markets Pulse survey expect Powell to stay at the helm until his term expires.
Trump's focus on interest costs comes at a time of renewed attention on the nation's skyrocketing interest payments on its ever-growing federal debt.
Interest payments for this fiscal year are nearing $1tn for the first time in the nation's history.
The president just signed the 'big, beautiful bill', which is seen to add more than $3bn to the deficit over the next decade and push interest rates even higher.
And Moody's recently downgraded the US debt in part because of the increase in government debt and interest payment ratios.
But even if Trump succeeds in pressuring the Fed to reduce rates, it may not significantly lighten the nation's interest payment burden, experts said.
The federal funds rate is only one of the factors that influences the interest rates on the federal debt, which is made up of a mix of short-term, medium-length and longer-duration Treasury securities.
Attacks against the Fed chair have stepped up lately and this has renewed the debate on how much a US president can and should influence a key institution designed to be independent.

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