Trump Discusses Firing Fed's Powell After Latest Rate Hike, Sources Say

Source: Bloomberg | December 21, 2018 | Jennifer Jacobs, Saleha Mohsin, and Margaret Talev

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 hike and months of stock-market losses, according to four people familiar with the matter.

Advisers close to Trump aren’t convinced he would move against Powell and are hoping that the president’s latest bout of anger will dissipate over the holidays, the people said on condition of anonymity. Some of Trump’s advisers have warned him that firing Powell would be a disastrous move.

Yet the president has talked privately about firing Powell many times in the past few days, said two of the people.

Any attempt by Trump to push out Powell would have potentially devastating ripple effects across financial markets, undermining investors’ confidence in the central bank’s ability to shepherd the economy without political interference. It would come as markets have plummeted in recent weeks, with the major stock indexes already down sharply for the year.

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It’s unclear how much legal authority the president has to fire Powell. The Federal Reserve Act says governors may be “removed for cause by the President.” Since the chairman is also a governor, that presumably extends to him or her, but the rules around firing the leader are legally ambiguous, as Peter Conti-Brown of the University of Pennsylvania notes in his book on Fed independence.

Such a move would represent an unprecedented challenge to the Fed’s independence. Though he was nominated by the president, Powell 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’s right for the economy over the long term rather than bend to the short-term whims of a politician.

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  • Consistent #26972

    EVERYDAY #26979

    Did Powell talk to Trump before the interest rates were raised? Maybe I’m naive, but I would have thought Powell or someone would have briefed the president before the rates were increased.

    Oh and let’s remember that Trump nominated Powell for the job.

    The rates were artificially low for a long time. They were bound to increase. It’s just that, coupled with Trump’s trade tantrums and the fact that people in business are not entirely believing the supposedly good economic news from DC bureaucrats, this probably was not a good time to raise interest rates. The combination of these and other factors may be foretelling the coming of a deep, far reaching recession.

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