PANews reported on April 23 that according to Jinshi, U.S. President Trump's public criticism of Federal Reserve Chairman Powell has intensified concerns that he might try to fire the central bank chief. However, even if he takes this historically significant and legally controversial action, Trump may still be unable to steer monetary policy in the direction he desires. Many economists suggest that firing Powell would not necessarily guarantee the rate cuts Trump wants.
Paul Ashworth, chief North America economist at Capital Economics, noted in a recent report: "Firing Powell is likely just the first step in undermining the Fed's independence. If Trump is determined to lower interest rates, he would also need to fire the other six members of the Federal Reserve Board, which would trigger more severe market volatility, cause the U.S. dollar to fall, and raise the long end of the Treasury yield curve."
Powell serves as both the Federal Reserve Board Chairman and the Chair of the Federal Open Market Committee (FOMC) responsible for setting interest rate policies. Ashworth pointed out that while FOMC members typically choose to be led by the presidentially appointed board chairman, they can also defy Trump's wishes and select someone else to lead the rate-setting committee.
Trump called the Fed chairman a "major failure" in a social media post on Monday, which shook financial markets. White House economic advisor Kevin Hassett stated last week that the president and his team were exploring the possibility of removing the Fed chairman. However, on Tuesday, Trump backtracked and said he would "undoubtedly" fire Powell.
It remains unclear whether Trump has the legal authority to fire Powell before his term as Fed chairman ends next year. Powell previously stated that he believes the president lacks the legal right to dismiss him. The Supreme Court will soon hear an appeal case regarding Trump's dismissal of other federal agency members, which might provide some insights into the Fed's future direction.
Speculation about Fed personnel changes and ongoing uncertainty in tariff policies seem to have already damaged investor confidence in the United States. In recent weeks, U.S. stocks, bonds, and the dollar have all declined. Wall Street professionals are concerned that Fed changes could lead to further sell-offs and heightened inflation fears.
