President Donald Trump speaks to the media on April 21, 2025 at the annual White House Easter Egg Roll on the South Lawn of the White House in Washington, D.C.
Rear Miris | Reuters
Criticism of President Donald Trump’s public chair Jerome Powell has fueled concerns about trying to fire the central bank chief, but it may not be enough for Trump to bending monetary policy in the direction of his preferences.
Even firing Powell doesn’t necessarily give Trump the interest rate cuts he wants, according to multiple economists.
“But perhaps firing Powell is just the first step in dismantling the Fed’s independence. If Trump is set to cut interest rates, he will have to fire six other Fed board members.
Powell is the chairman of both the Federal Reserve Committee and the Federal Open Market Committee, which sets interest rate policies. Ashworth pointed out that FOMC members usually chose to lead them to the chairman of the Governor’s Committee, which the president designated, but they could defeat Trump and choose someone else to head the Rate Setting Committee. “Most of the power of leadership comes from historical respect,” said Michael Feroli, chief US economist at JPMorgan in a memo on Monday.
Peter Sidorov, a senior economist at Deutsche Bank, reflected the idea that individual Fed members might oppose the hopes of new leaders if they felt Trump was in excess.
“It should be noted that although the Fed chair has had a major impact on the FOMC, as monetary policy measures are made by majority vote, removing Powell will result in increased pushbacks from other members against Fed pressures, and that it can provide a more simple policy,” Sidorov told clients on Tuesday.
This debate on Wall Street comes after Trump criticised Powell multiple times over the last few days. This includes calling the Fed’s chair “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 removing the Fed’s chairs.
It is unclear whether Trump even has the authority to remove Powell before his term as governor’s chairman next year. Powell previously said he doesn’t believe the president is legally permitted to fire him. The Supreme Court will hear Trump in other federal organizations suing for the firing of board members in other federal organizations in cases that could shed light on the next one of the Feds.
Speculations about changes in the Fed, along with ongoing tariff uncertainty, appear to have hurt investors’ confidence in the US. U.S. stocks, bonds and dollars have all fallen in recent weeks.
Wall Street pros are worried that changes in the Fed could lead to more sell-outs and fears of higher inflation.
“The decline in the Fed’s independence will add an opposite risk to the outlook for inflation, which is subject to upward pressure from tariffs and somewhat rising inflation expectations,” Felori said in a note to his client.
“Those unfavourable outcomes have often been followed by his intentions so far, but they have been expected to discourage the president from threatening the Fed’s independence,” he added.
– Reported by CNBC’s Michael Bloom.
