We don’t know whether Donald Trump has the legal authority to remove Jerome Powell as chairman of the Federal Reserve Board. Given the turmoil in the stock market, Trump may be better off just waiting until his term expires a year from now, and get rid of him then.

The Federal Reserve Act states that Fed governors serve fixed terms “unless sooner removed for cause by the President.” Courts have generally interpreted “for cause” as equivalent to “inefficiency, neglect of duty, or malfeasance.”  This is the language from the FTC act that Trump is already challenging in a case moving through the courts.

Here’s an update to a Fed scorecard we ran in December, as suggested by Louis Woodhill.  It shows how often Jay Powell succeeded at his own stated goal of achieving a 2% percent 12-month PCE price index target, +/- 10%. We start the scorecard with Powell’s 12th month on the job because it’s a year-over-year metric. He has now presided over 73 months… and hit his target within a 10% margin of error only twice (see the two green bars below).

Can you fire someone “for cause” with a .027 batting average? Well, we wouldn’t recommend he become a free agent or go into the portal.