The Court has backed the central bank and Jerome Powell despite the president's attempts to exert pressure on rate decisions
In a pivotal move likely to shape the future of federal oversight, the US Supreme Court has allowed President Donald Trump to dismiss members of independent federal boards, an action that could erode longstanding congressional protections for such agencies. But notably, the Court drew a distinct line around one institution: the Federal Reserve.
While the unsigned decision permits the president to remove officials from entities like the National Labor Relations Board (NLRB) and the Merit Systems Protection Board (MSPB)—both historically shielded from executive interference—it simultaneously took pains to exclude the Federal Reserve from this reshaped balance of power.
That exception appears to reassure financial markets and central bank officials, indicating that the justices are not prepared to subject the Fed to political influence.
“The Federal Reserve is a uniquely structured institution with historical and constitutional characteristics that distinguish it from other administrative bodies,” the majority wrote, underscoring its quasi-private framework and deep roots in early American banking history.
This boundary-setting comes amid broader questions about the independence of American institutions and follows months of criticism from Trump directed at Federal Reserve chair Jerome Powell.
Trump has repeatedly lambasted Powell for his handling of interest rates, briefly threatening to remove him—a move that alarmed economists and global markets.
Although Thursday’s decision does not formally overturn Humphrey’s Executor v. United States, a 1935 case that upholds congressional protections for agency heads, the Court’s order enables the president to dismiss board members even while litigation continues, hinting at a future where such insulation may no longer be guaranteed.
Justice Elena Kagan, writing for the dissenting liberal minority, criticized the selective protection for the Fed. “I am glad to hear it, and do not doubt the majority’s intention to avoid imperiling the Fed,” she noted, before warning that the legal justification for safeguarding the Fed is rooted in the same doctrine that shields other boards.
Still, the majority’s carveout could represent a pivotal moment for central bank independence. For nearly a century, Congress has relied on staggered terms and cause-based removal protections to keep monetary policy isolated from short-term political pressures. The Fed’s ability to make unpopular decisions—like raising interest rates to contain inflation—has long rested on these structural defenses.
Powell himself recently acknowledged the significance of the legal proceedings, though he expressed confidence that the central bank’s autonomy was legally sound. “Our independence is a matter of law,” he said last month, emphasizing the Fed’s role as a nonpartisan economic steward.
That sentiment has found backing abroad. Tiff Macklem, governor of the Bank of Canada, called central bank independence “sacrosanct” and warned against undermining it. Speaking from Ottawa, Macklem praised the track record of independent monetary authorities and cautioned that political interference could compromise economic stability.
The Supreme Court’s signal comes at a delicate moment for the global economy. Investors have been closely watching the outcome of this case, concerned that unchecked executive authority over the Fed could unsettle markets and weaken international confidence in American financial governance.
For now, the Court’s action appears to thread a careful needle: expanding presidential control over much of the executive branch while preserving a cornerstone of financial stability. Whether that balance holds in the long term may depend on whether the Court formally overturns Humphrey’s Executor—a step with the potential to remake the administrative state.
As for the Federal Reserve, it remains, at least for now, above the fray.
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