If Trump fires the Fed’s Powell, ‘both the currency and the bond market can collapse'
President Donald Trump said he has no immediate plans to remove Federal Reserve Chair Jerome Powell, despite raising the possibility during a private meeting with Republican lawmakers — a remark that later leaked to the media.
“No, we’re not planning on doing anything,” Trump told reporters Wednesday. He added, “I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud.”
Earlier in the day, a White House official — speaking anonymously — indicated Trump was considering action against Powell following a meeting Tuesday evening with congressional Republicans, which focused in part on cryptocurrency legislation. Several lawmakers who attended left with the impression that Powell’s removal was under serious consideration, with Trump reportedly polling members on whether the Fed chair should be dismissed.
Trump’s comments in the Oval Office left open the possibility of removing Powell "for cause." The president and his allies have repeatedly criticized Powell over the Fed’s decision to keep interest rates steady and the high cost of renovations at the central bank’s Washington headquarters.
The episode marks the latest development in Trump’s long-standing feud with Powell. While Trump has often floated the idea of firing the Fed chair over monetary policy disagreements, he has thus far stopped short of doing so.
Economists and analysts have warned that ousting Powell could destabilize financial markets and trigger a major legal and political battle over the Federal Reserve’s independence. However, market reaction on Wednesday was relatively muted.
Stocks, the U.S. dollar, and short-term bond yields dipped initially on speculation that Powell might be removed, but no major selloff followed.
Derek Tang, an economist at LH Meyer/Monetary Policy Analytics, said in a client note: “The market did not react that badly before Trump disavowed the reports. Were it a trial balloon to test the waters, it was a success and might embolden Trump. Now the window of acceptability has shifted, for the worse.”