Rumors of the Federal Reserve chairman's dismissal shake the dollar again.

A new wave of speculation about the future of Federal Reserve Chairman Jerome Powell caused a minor storm in the markets on Wednesday. Investors woke up to news of a closed-door meeting between President Donald Trump and members of Congress from his party in which the possibility of immediately firing Powell was openly discussed , citing the White House's smear campaign against the central banker, accusing him of lavishly renovating the institution's headquarters with taxpayer money.

At the meeting, The New York Times reported, the president brandished a letter purportedly bearing the banker's dismissal and his signature, and asked whether he should send it. Representative Anna Paulina Luna, Republican of Florida, posted a very clear message on the social networking site X while she was in the room: " Jerome Powell will be fired. The firing is imminent ," she exclaimed.

After a grim start, stock markets rebounded from their lows when the president, speaking from the Oval Office, stated that he "doesn't plan to do anything" with the Fed chairman, at least for now, and that these talks with politicians were merely discussions about scenarios "in theory." The market, as it did with the tariffs, is clutching at straws, because Trump's words are anything but reassuring. The dollar, which has had its worst six-month start to a year since the 1970s, moderated its decline, but is still down 0.2%.

After criticizing Powell's work, insisting that he is "terrible" and a very bad central banker, and telling him that he should have lowered rates long ago, as the ECB has done in Europe, for example, the president only evasively responded to the question of whether he is preparing to remove him: "We don't plan to do anything," he first told reporters at the White House. "I'm not ruling anything out; I think it's very unlikely. Unless he has to leave for fraud," he added as a corollary. And that's the key: Throw him out, or force him to leave, in exchange for not going after him under the pretext of projects that will be completed when he will no longer be at the helm of the institution.

Trump desperately needs him gone to complete his plan, which includes tariffs and cheaper loans if he can get interest rates down to 1%, an impossible short-term goal given that they're currently at 4%, with very clear inflationary pressures and doubts about the composition of growth. None of this seems important, and his economic team not only doesn't disagree with these theories, but seems to be encouraging them, while all the top officials and advisors position themselves as potential replacements for Powell.

That's why they've all been criticizing, insulting, and ridiculing him, both publicly and privately, for over six months. The president has tried every type of pressure imaginable, but to his immense frustration, it doesn't work. "I insult him in every way possible to get him to do something. I do it in every way possible. I'm unpleasant. I'm kind. Nothing works," he admitted without hesitation on camera last month. But Powell, appointed by Trump in November 2017, reappointed by Joe Biden, and whose term ends in May 2026, isn't taking any notice. He remains in his position with no intention of resigning, continuing to lead the charge that considers lowering interest rates too hasty due to the uncertainty created by Trump's economic policies. And he continues to speak in his speeches about the inflationary and GDP risks posed by tariffs, the administration's flagship proposal.

Having exhausted traditional avenues, the government has turned to less orthodox ones. For two weeks now, the administration has been accusing Powell of being responsible for the cost overruns on the Federal Reserve headquarters renovations , claiming without any evidence that they will cost $800 million more than expected not because of inflated materials or labor costs, but because of the central banker's alleged love of luxury. "The renovation totals $2.5 billion, approximately $700 million more than its original cost. These renovations include rooftop garden terraces, fountains, VIP elevators, and premium marble . The cost is double that of renovating an ordinary historic federal building . The Palace of Versailles would have cost $3 billion in today's dollars!" the White House budget official wrote in an official letter.

It's not just that. The president's team has launched a smear campaign with the help of his most loyal supporters in Congress and the media, arguing that Powell lied in his appearances on Capitol Hill . And that this would be more than enough reason for his dismissal. It wouldn't be for his monetary decisions, but for other reasons. And therefore, it's legal.

That's the back door to executing his dismissal, if Powell doesn't step aside first. Because Trump can't do it just like that. He's thought about it, his legal departments have studied it carefully, and although they believe they have a chance, the Supreme Court's position on this matter (unlike the rest of the dismissals of officials and regulators since January, which the high court has been upholding) is that it would be illegal without just cause. And not lowering interest rates at the executive branch's whim is not.

The markets, despite the apparent calm of the last three months, during which they have recovered much of what they lost after the declaration of a global trade war, are taking this type of interference very badly, in the purest Recep Tayyip Erdogan style, which if it has served any purpose, it has been to drive inflation above 30%. Firing Powell would not only entail a legal battle over the limits of Trump's authority , but would inevitably upset the markets, especially the bond markets. A Fed chairman more than willing to lower rates significantly (or rather, push for them, since decisions are voted on by the Fed board) could be welcome in risky assets like stocks.