Trump Criticizes $2.5B Fed Renovation, Suggests It Could Justify Firing Powell

President Donald Trump has escalated his criticism of Federal Reserve Chair Jerome Powell by suggesting that Powell’s oversight of a $2.5 billion renovation of the Fed’s headquarters may be grounds for removal.

Trump, who has frequently attacked Powell over monetary policy, called the spending “disgraceful” and said, “I think it sort of is” a fireable offense.

“They spent $2.5 million building this place. I have to say this. I think he’s terrible. I think he’s a total stiff. But the one thing I didn’t see him as is a guy that needed a palace to live in,” Trump told reporters Tuesday.

The Federal Reserve headquarters renovation project began in 2021 and was originally approved in 2017 with a $1.9 billion budget. Costs rose to $2.5 billion due to unforeseen conditions like asbestos, soil contamination, and high water tables.

Powell has denied accusations of luxury spending and asked the Fed’s inspector general to review the project. Senate lawmakers recently questioned Powell on the rising costs and the alleged inclusion of extravagant features.

Trump has long been frustrated with Powell for not cutting interest rates more aggressively. He often refers to Powell in disparaging terms, calling him a “moron” and “a total stiff.” Trump accused Powell of being ineffective, claiming:

“You talk to the guy. It’s like talking to—nothing. It’s like talking to a chair. No personality, no high intelligence, no nothing.”

Trump’s remarks have renewed fears that the Fed’s independence could be undermined.

“The independence of the Fed is absolutely critical, and not just for the current Fed chairman, who I respect, but for the next Fed chairman,” JPMorgan Chase CEO Jamie Dimon told reporters in a conference call earlier on Tuesday. “Playing around with the Fed can often have adverse consequences, absolutely opposite of what you might be hoping for.”

Analysts are concerned that political pressure on the Fed could lead to volatility in markets, higher inflation expectations, and long-term damage to the credibility of US monetary policy.

“If markets believe that a politically-captured Fed will lower rates to stimulate growth regardless of economic consequences, long-term inflation expectations will rise, causing the curve to steepen,” said Guy LeBas, chief fixed income strategist at asset manager Janney Capital Management.

Chip Hughey, managing director of fixed income at Truist Advisory Services, added:

“While short-dated yields could fall in this scenario based on a faster pace of Fed rate cuts moving forward, longer-dated yields would likely recalibrate higher for stickier inflation and rising term premia based on the erosion of institutional trust.”

Bond markets reacted to the controversy, with 30-year Treasury yields rising above 5%, signaling investor concern. Analysts warn that if investors perceive the Fed as politically compromised, it could lead to higher long-term borrowing costs. Some investors are shifting into gold and diversifying away from U.S. Treasuries as a precaution.

“I still see the risks as fairly minimal, but higher than they were a week or two ago… The risk-reward for me in Treasuries right now just isn’t there,” said Matt Orton, head of market strategy at Raymond James Investment Management.

Powell’s term as Fed Chair runs through May 2026, and his board seat extends to January 2028. Legally, Trump cannot fire Powell over policy disagreements, but some speculate he may try to build a case for dismissal based on “cause.” The Trump administration is reportedly exploring replacements for Powell or the possibility of a “shadow” Fed chair to exert policy influence.

With input from Reuters, CNN, and Fox Business.