Trump Admits Considering Firing Fed's Powell, Unlikely to Happen
President Donald Trump has stated that it is unlikely he will fire the head of the US central bank, Jerome Powell, after asking lawmakers about the possibility. Reports of Trump considering Powell's dismissal caused stock markets and the dollar to drop, but they quickly recovered when Trump played down the discussions. Removing the chair of the Federal Reserve would be a significant departure from tradition.
Trump has been urging Powell to lower US interest rates and has criticized his performance, even calling him a "knucklehead" and claiming he is doing a poor job. While Trump admitted to revisiting the idea of firing Powell, whom he nominated for the position, he stated that he currently has no plans to do so unless there are grounds for fraud.
The president's allies have also criticized Powell, accusing him of mismanaging the renovation of Federal Reserve properties. Recent attacks on Powell suggest the administration may be building a case against him, according to analysts at Deutsche Bank. Powell's term as Fed chair ends in May next year, but he can remain a governor until 2028. The president can remove Fed governors before their terms end for serious misconduct.
Powell has asserted his intention to serve his full term as chair and has refuted Trump's authority to fire him over policy disagreements. The Fed has defended the renovations, stating that they will eventually reduce costs by consolidating operations and attributing cost overruns to unforeseen conditions. Trump has considered firing Powell since his first term but has backed down due to investor concerns.
Trump's administration has shown increasing hostility towards the Federal Reserve, raising concerns about the global financial system amid trade tensions. The US economy is slowing, and Trump's tariffs are adding pressure. Powell's role in setting interest rates is crucial, with implications for borrowing costs across the economy. Trump advocates for lower rates to stimulate the economy, while Powell proceeds cautiously due to concerns about inflation from tariffs.
Many economists and investors warn that political interference in the Fed's leadership could undermine price stability and investor confidence. The head of JP Morgan Chase emphasized the importance of the Fed's independence, cautioning against meddling with its decisions. Treasury Secretary Scott Bessent mentioned a process to identify a replacement for Powell, with names like Kevin Hassett and Kevin Warsh being considered. Powell was nominated by Trump in 2017, succeeding Janet Yellen appointed by Barack Obama.