It’s long been mainstream economic dogma that monetary policy is typically better handled by technocrats than lackeys who must answer to the whim of politicians, particularly the chief executive. As the Trump administration dramatically reshapes the federal bureaucracy and tests the limits of executive power, however, the nature of the Fed’s independence has come under scrutiny.

The idea that America’s central bank should operate without political interference is a norm without ironclad protections, David Zaring, a professor of legal studies and business ethics at the University of Pennsylvania’s Wharton School, told Fortune.

“Fed independence is thought to be this really important thing and something that the central bank guards very carefully,” he said, “and it doesn’t have a whole lot of legal basis.”

If Trump did try to remove Powell, the case would almost certainly end up at the Supreme Court and test a fragile bit of judicial precedent. In Humphrey’s Executor v. United States in 1935, the court unanimously ruled Franklin D. Roosevelt had unlawfully removed the chair of the Federal Trade Commission for political reasons and that the heads of such agencies could only be removed “for cause.”

But Trump’s acting solicitor general, Sarah Harris, has stated the Department of Justice will no longer defend those provisions, though she did not explicitly mention the Fed. She and other right-wing critics argue Humphrey’s Executor interferes with the president’s constitutional duty to “take care that the laws be faithfully executed,” as set forth in Article II. There are indications the Supreme Court—which currently holds a 6-3 conservative majority, including three Trump appointees—is sympathetic to such arguments.  

In 2020, the court ruled in a 5-4 decision that Trump had the power to fire the head of the Consumer Financial Protection Bureau, which he has now essentially shuttered, and that Humphrey’s “for cause” protections only applied to multi-head agencies, which includes the Fed.

Justices Clarence Thomas and Neil Gorsuch said they would have overturned Humphrey’s outright, however, and its protections will be stiffly tested after Gwynne Wilcox became the first member of the National Labor Relations Board to be fired by the president, sparking a lawsuit that will likely make its way to the Supreme Court.

Zaring predicts the court will side with the new administration.

“Oddly enough, the thing that might deter them from doing so is, frankly, this concern about the Fed,” he said, “which I think a lot of people want to see remain independent, at least when it comes to monetary policy.”

A history of Fed independence

That’s because this norm has a strong economic rationale, said Itay Goldstein, the chair of Wharton’s finance department.

“If the government controls the Fed, the government will always be tempted to keep rates down,” he said, “which is going to cause inflation.”

That’s been a problem in autocracies. Turkey, for example, has recently suffered from inflation surging above 90% after President Recep Tayyip Erdogan pushed the country’s central bank to institute ultra-loose monetary policy.

There are signs the Trump administration wants to avoid accusations of similar behavior. Trump and Treasury Secretary Scott Bessent have seemingly pivoted to focusing on lowering the 10-year Treasury, the benchmark rate for mortgages and other types of loans throughout the economy.

The Fed, meanwhile, controls the rate at which banks can borrow from one another overnight, but its moves affect the rest of the economy by indirectly affecting instruments like the 10-year. The foundations of the central bank’s independence were laid in the Treasury–Federal Reserve Accord of 1951 as inflation skyrocketed following the World War II boom and continued heavy spending amid the Korean War.

Richard Nixon, however, thought that policy cost him in his election loss to John F. Kennedy. When he finally assumed the Oval Office, he pressured Fed Chair Arthur Burns to keep rates low in the early 1970s. A ruinous mix of inflation and high unemployment—dubbed “stagflation”—soon followed.

President Jimmy Carter paid a political price for the malaise when he was ousted after one term by Ronald Reagan, but not before he appointed Paul Volcker to lead the Fed. Volcker raised rates to a record 20%, which prompted a recession but eventually cured the country’s runaway inflation.

He was not necessarily popular as millions of Americans lost their jobs—homebuilders famously sent two-by-fours of lumber to the Fed’s headquarters—and Reagan, along with Treasury Secretary James Baker, tried to pressure Volcker to lower rates faster than he wanted. As Ben Bernanke, the Fed’s chair from 2006 to 2014, told the New York Times after Volcker’s death, Volcker came to represent the central bank’s ability to do something “politically unpopular but economically necessary.”

“That’s supposed to be evidence that this Fed independence is smart,” Zaring said.

Not everyone on Wall Street sees it that way. Jay Hatfield, CEO of Infrastructure Capital Advisors, believes the current Fed led by Powell was slow to respond to America’s recent bout with inflation—the worst since Volcker’s tenure—and is now risking a recession by keeping monetary conditions too tight.

He thinks it’s only fair for the president to get a say on monetary policy. After all, Trump’s latest election victory shows voters are more than willing to blame incumbents (or, in this case, former Vice President Kamala Harris) for economic conditions, he said.

“Basically, Biden got fired because of Powell’s terrible monetary policy,” said Hatfield, who manages ETFs and several hedge funds.

It’s not hard to picture why the president would, therefore, want sway over such a crucial policy lever. But Trump might not go for the Fed’s jugular—at least for now.