Trump’s "Fire Powell" Reversal Escalates Odds of Direct Confrontation as Year-End Looms

WASHINGTON (AP) — President Donald Trump’s declaration on Monday that he "still might" fire Federal Reserve Chairman Jerome Powell has injected sudden volatility into the quiet final days of 2025. With less than 48 hours remaining in December, the President's pivot from passive criticism to an active termination threat significantly raises the statistical probability of a principal-to-principal engagement—whether to demand a resignation or deliver a final ultimatum.

The comments, made on December 29, explicitly reverse Trump's mid-2025 stance that dismissing the Fed Chair was "highly unlikely." For market participants tracking the likelihood of direct contact, this rhetorical hardening suggests Powell has moved from the periphery to the forefront of the President's immediate agenda.

The December Window: A Catalyst for Contact The timing of the threat forces a tactical re-evaluation of the "Will they talk?" question for December. While the relationship has recently been characterized by public barbs rather than private dialogue, the re-introduction of the "firing option" creates a specific catalyst for interaction before the calendar turns.

Legal experts emphasize that under the Federal Reserve Act, a Chair can only be removed "for cause." Attempting to bypass a direct confrontation to negotiate a resignation or policy shift would trigger immediate legal and market chaos. Consequently, if the President is serious about removal, a "resign or be fired" phone call is the standard procedural precursor, incentivizing a conversation before New Year's Eve.

January Outlook: Structural Pressure Mounts If the silence holds through the remaining hours of December, the environment for direct engagement in January 2026 appears increasingly unavoidable due to a coordinated pressure campaign involving key administration surrogates.

Just 24 hours prior to the President's remarks, Elon Musk, leading the Department of Government Efficiency (DOGE), labeled the Federal Reserve "absurdly overstaffed" and threatened an audit. This structural threat, combined with Trump’s December 23 outlining of a "Trump Rule"—demanding rate cuts based on stock market performance—sets the stage for a January showdown. The administration is shifting from general complaints to operational threats, a dynamic that typically necessitates direct negotiation.

The Market "Guardrail" The primary friction regarding a firing—and the reason a conversation may occur instead of a unilateral tweet—remains financial stability. On Sunday, Bank of America CEO Brian Moynihan warned on Face the Nation that markets would "punish people" if the Fed’s independence is compromised.

With Powell’s term expiring in May 2026, the President faces a binary choice: risk a market crash by firing Powell via social media, or engage Powell directly to force a policy alignment for the final months of his tenure. Monday’s comments suggest the White House is no longer content to wait out the clock in silence.