Trump could be merely blowing off steam, or his comments could be indicative of something more serious. The Federal Reserve Act specifies that a president can remove governors — which presumably includes the Fed Chair — but only “for cause” and not over policy differences.
While it’s far from clear what would constitute just cause, market observers suggest it would have to rise to something unethical, or outright illegal.
Geoffrey Miller, a legal scholar and the founder of New York University School of Law’s Center for Financial Institutions, told CNBC on Saturday that “the ordinary interpretation would be some sort of malfeasance in office.” That criteria could include the unauthorized disclosure of confidential information, serious personal misconduct or failing to perform the duties of his office.
Miller, however, cautioned that there was “a lurking constitutional issue in the form of the argument that the Fed is part of the executive branch. and the president as head of the executive branch can fire any of his or her top officers, even if Congress says otherwise.”
With markets already in turmoil, “President Trump would be unwise to fire the Fed Chair, as the political consequences and impact on markets would be dire.”
At present, Trump appears to have his hands full, wrangling with Congress over a federal government shutdown provoked by a fight over funding for a border wall.
That fight, which threatens to extend into Christmas, means it may be a less than ideal time shop for a new Fed chair, analysts told CNBC.
“Trump’s more pressing problems are the government shutdown and mounting political opposition,” Ian Lyngen, head of rate strategy at BMO told CNBC.
Sam Stovall, chief investment strategist of U.S. Equity Strategy at CFRA Research, drew an analogy between Trump’s reality television show, “The Apprentice,” and his fight with the Fed Chair.
“I guess he keeps thinking he’s back on his TV show because if he hired Powell, he thinks he can technically fire Powell. Obviously, that’s not the case,” Stovall said.
“It certainly would undermine investor confidence even further because I think it would cause people to say ‘What is this guy doing?'” he added.
–CNBC’s Tom Franck and Yun Lee contributed to this article.