PANews reported on April 23 that according to Jinshi, US President Trump's public criticism of Federal Reserve Chairman Powell has heightened concerns that he is trying to fire the central bank governor. However, even with this historic and legally controversial move, Trump may still not be able to get monetary policy in the direction he wants. Several economists said that even if Powell is fired, Trump may not necessarily get the interest rate cut he wants.
“Firing Powell is likely just the first step in dismantling the Fed’s independence,” Paul Ashworth, chief North American economist at Capital Economics, said in a recent report. “If Trump is determined to lower interest rates, he would also have to fire the other six members of the Fed’s board of governors, which would trigger even more severe market turmoil, causing the dollar to fall and the long end of the U.S. yield curve to rise.”
Powell is both the chairman of the Fed's board of governors and the chair of the Federal Open Market Committee, which sets interest rate policy. Ashworth noted that while FOMC members typically choose the president of the board of governors, who is appointed by the president, to lead them, they can also defy Trump's wishes and choose someone else to head the rate-setting committee.
Trump called the Fed chairman a "major loser" in a social media post on Monday that shook financial markets. White House economic adviser Kevin Hassett said last week that the president and his team were exploring the possibility of firing the Fed chairman. However, Trump backtracked on Tuesday and said he would "definitely" fire Powell.
It is unclear whether Trump actually has the power to fire Powell before his term as Fed chairman ends next year. Powell has previously said he does not believe the president has the legal authority to fire him. A Supreme Court case about Trump's firings of other federal agency members will soon be heard, and the case may provide some clues to the Fed's future direction.
Speculation about Fed personnel changes and continued uncertainty about tariffs appear to have hurt investor confidence in the U.S. Stocks, bonds and the dollar have all fallen in recent weeks. Wall Street professionals worry that changes at the Fed could lead to further selling and concerns about rising inflation.
