President Donald Trump has discussed firing Federal Reserve Chairman Jerome Powell as his frustration with the central bank chief intensified following this week’s interest-rate increase and months of stock-market losses, Bloomberg informed.
Advisers close to Trump are not persuaded that the President would go against Powell and are hoping that the President’s latest bout of anger will soften over the holidays. Some of Trump’s advisers issued warnings that Powell’s firing would be a disastrous move.
Any attempt by the President to fire Powell would have devastating effects across financial markets, undermining investors’ confidence in the central bank’s ability to shepherd the economy without political meddling.
White House spokespeople did not want to comment, as did the Fed spokeswoman Michelle Smith.
It is not clear if the President has legal authority to fire Powell. The Federal Reserve Act says governors may be “removed for cause by the President.”
However, this move would surely represent an unprecedented challenge to the Fed’s independence. Although Powell was nominated for the position by Trump himself, he was thought to be insulated from Trump’s dissatisfaction by a tradition of respect for the independence of the central bank.
That separation of politics from monetary policy is supposed to instill confidence that Fed officials will do what is right for the economy over the long term rather than bend to the short-term whims of a politician.
Trump’s anger with Powell has greatly intensified in recent days and although Trump wants to stop the interest rate increases that slow economic growth, such a move could backfire by roiling already turbulent financial markets.