Powell said the independence of Fed governors 'is a matter of law,' but he's keeping an eye on a Supreme Court case

One day after Federal Reserve Jerome Powell said he would prioritize fighting inflation over employment, President Donald Trump stepped up his rhetoric against the central-bank chief.

In a posting on Truth Social, Trump said Powell's "termination" could not come soon enough as he gave him the nickname "Too Late."

Powell himself on Wednesday had talked about the legal backing that will allow him to stay in his role until his term as chair expires in May 2026.

"Our independence is a matter of law," said Powell, pointing out Fed governors are not removable, except for cause. But he did talk about a Supreme Court case - Trump v. Wilcox - in which the justices will determine whether the president can fire commissioners from independent agencies.

"I don't think that that decision will apply to the Fed but I don't know. It's a situation we're monitoring carefully," he said.

Trump's solicitor general, D. John Sauer, in a Supreme Court filing on the Wilcox case seemed to agree with Powell.

"While respondents focus heavily on other agencies such as the Federal Reserve Board, they ignore Seila Law's observation that the Federal Reserve's tenure protection presents a distinct question with a unique historical pedigree," said Sauer. "That question is not at issue here."

Analysts at Evercore led by Krishna Guha said the ruling will be critical.

"It is difficult to overstate the consequences at this stressed moment of a Court ruling that found that President Trump - who has just tweeted saying Powell's termination cannot come soon enough - does have the authority to dismiss the heads of independent agencies and did not establish a clear carve-out for the Fed," they said in a note.

It should be noted that, for now, the market still doesn't expect Powell's termination. On the prediction market Polymarket, the odds Trump will remove Powell this year rose as high as 19 cents on the dollar, up slightly from 16 cents.

Powell gave Trump plenty of ammunition for criticism during Wednesday's speech, saying the tariffs imposed by Trump were much higher than expected and were likely to put upward pressure on inflation as well as weigh on growth. Powell also said the tariffs could put the Fed's dual mandate in conflict.

"Without having a better idea of underlying economic trends and clear understanding of how tariffs will impact growth and inflation going forward, Powell and company pretty much have their hands tied, while being stuck between a rock (inflation) and a hard place (growth risks)," said Tom Essaye of the Sevens Report.