4 days Ago By Firstpost
US President Donald Trump has taken aim at Jerome Powell yet again. Trump has slammed the Federal Reserve chief, saying his resignation ‘cannot come fast enough.’ But what did Trump say? But why is Trump so upset? Why can’t he just fire the Federal Reserve chief? Let’s take a closer look then “Powell’s termination cannot come fast enough,” Trump wrote on his Truth Social platform.
“Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS. Too Late should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now.” Powell was initially nominated by Trump in 2017.
He was appointed to another four-year term by then President Joe Biden in 2022. His term of office ends in 2026. “If I want him out, he’ll be out of there real fast, believe me,” Trump told reporters in the Oval Office, as per India Today .
“I’m not happy with him.” Trump’s remarks came a day after Powell, speaking at an Economic Club of Chicago event, took aim at the president’s tariffs . “The level of the tariff increases announced so far is significantly larger than anticipated,” Powell said.
“The same is likely to be true of the economic effects, which will include higher inflation and slower growth.” Trump has claimed that the tariffs will generate billions in revenue and lead to a resurgence. However, economists say that they will result in higher inflation.
Powell at the event also reaffirmed the central bank’s long standing independence. “That’s the only thing we’re ever going to do,” Powell said. “We’re never going to be influenced by any political pressure.
” “Our independence is a matter of law,” he added. Powell has steadfastly maintained that the Fed is independent from politics, a stance that Fed chairs have stressed since at least the 1970s. Back then, the Fed was widely seen as worsening a 15-year run of high inflation by giving in to demands from President Richard Nixon to keep interest rates low in the run-up to the 1972 election.
Economic research has suggested an independent central bank is more likely to keep inflation in check because it is more willing to do unpopular things, such as lift interest rates, to fight rising prices. Wall Street investors also largely prefer an independent Fed, though the stock market did not appear to react to Trump’s comments. As per BBC , Trump is also upset with Powell over the interest rates.
The Fed’s benchmark interest rate is currently 4.25 per cent to 4.50 per cent.
Powell on Wednesday suggested that the central bank will focus on fighting inflation in the wake of the tariffs , which would likely mean they would keep rates elevated. Trump’s criticism stems from his view that, as he said “we have essentially no inflation.” The Fed sharply raised rates in 2022 and 2023 to slow borrowing and spending and tame inflation, which dropped steadily from a peak of 9.
per cent in 2022 to 2.4 per cent last month. Inflation is not far from the Fed’s target of 2 per cent.
The Fed even cut rates three times at the end of last year. But since then, Powell and most other Fed policymakers have underscored that they are keeping rates on hold because of the uncertainty created by Trump’s sweeping tariffs , including a 10 per cent tax on all imports and a 145 per cent levy on imports from China. During his campaign for president, Trump had vowed to keep interest rates low to give relief to borrowers.
Ironically, Trump had accused previous Fed chair Janet Yellen of keeping interest rates too low. Trump is also looking for someone to blame in case his tariff strategy goes horribly wrong. “If things continue to go down and a deal is not made, he’s going to blame the downturn in the market on Jay Powell and say that it was because he didn’t cut the rates,” Wall Street trader Peter Tuchman told CNN, Because it’s not that simple.
According to CNN , the Federal Reserve was established by Congress in 1913 as an independent body. The entire idea was to make it immune from political pressure – thus allowing it to act independently. As per India Today , the dismissal of a Fed chair is laid out in the Federal Reserve Act of 1913.
Under this law, the sitting president can only dismiss a Fed chair “for cause.” As per The Times Of India, courts have viewed this as misconduct, malfeasance and inefficiency. The courts have also stepped in when a president tried to fire the head of an independent body like the Fed.
As per SCOTUSblog, in Humphrey’s Executor v. United States , the Supreme Court stepped in when then President Franklin Delano Roosevelt tried to fire William Humphrey – a former head of the Federal Trade Commission. Roosevelt tried to remove Humphrey in 1933 due to the commissioner’s opposition to New Deal policies.
The key here is that the Supreme Court unanimously upheld the “for-cause” removal limitations that Congress had written into the FTC Act. Powell previously Trump firing him “would not be permitted under the law.” He himself pointed this out at the event in Chicago.
“We’re not removable except for cause. We serve very long terms, seemingly endless terms,” Powell said. At a November news conference before Trump took charge, Powell hinted that he would not step down if the incoming president asked him to resign.
However, that hasn’t stopped Trump from talking about trying to fire Powell. As per a report in Wall Street Journal, Trump during meetings at his Mar-a-Lago resort in Florida has toyed with the idea of removing Powell. Trump even spoke to ex-Federal Reserve chief Kevin Warsh about possibly replacing Powell.
Warsh, a George W Bush appointee, ran the Fed from February 2006 to April 2011. Warsh told Trump he ought to let Powell finish his term without interference, the WSJ , quoting unnamed people familiar with the matter, reported. However, there is a possible twist in the offing.
A case before the Supreme Court could make it easier for a president to fire top officials, such as the Fed chair, at independent agencies. The case centres on Trump’s dismissal of Gwynne Wilcox of the National Labor Relations Board and Cathy Harris, Merit Systems Protection Board chair. At issue are two Trump firings, which the justice have let stand while they consider the case.
Powell said he is watching the case closely but that it might not apply to the Fed, given that the court has in the past carved out exemptions for the central bank. Lawyers for the Trump administration, seeking to narrow the focus of the case, have also argued that it does not involve the Fed. Powell also has other defenders.
Democratic Senator Elizabeth Warren has warned that Trump trying to fire Powell would ‘crash the stock market.’ “I have tangled with [Powell] on a regular basis about both regulations and interest rates,” Warren was quoted as saying by CNBC. “But understand this: If Chairman Powell can be fired by the president of the United States, it will crash markets in the United States,” she said.
If key economic levers are “subject to a president who just wants to wave his magic wand,” then the US will be indistinguishable “from any other two-bit dictatorship around the world,” Warren added. BBC quoted ECB president Christine Lagarde as offering support for Powell. “I have a lot of respect for my friend and esteemed colleague Jay Powell,” Lagarde said.
“We have a solid, steady relationship amongst central bankers.” The ECB recently cut interest rates from 2.5 per cent to 2.
25 per cent. With inputs from agencies.
