Trump expressed to GOP legislators his intent to dismiss Chairman Powell of the Federal Reserve in the near future, as reported by multiple sources and authorities.
In a recent development, the ongoing pressure campaign by President Donald Trump to have Federal Reserve Chair Jerome Powell removed from his position has raised concerns about potential consequences and legal implications for the U.S. economy and financial markets.
If Powell were to be fired, market instability could ensue. The sudden removal of a Federal Reserve Chair could lead to market volatility, undermining the central bank's independence and stability. Investors might react negatively to the perceived political interference, potentially leading to a decline in stock prices and an increase in interest rates[1][2].
The credibility and trust in U.S. institutions could also erode. Firing Powell might be seen as a political maneuver rather than a decision based on merit or performance, which could harm the reputation of the Federal Reserve and the U.S. government globally[2].
Economic policy impact could also be significant. Powell's removal could shift the Fed's focus away from current policies, such as managing inflation and interest rates, toward more politically driven decisions. This could disrupt ongoing economic strategies and lead to unpredictable outcomes[2].
Legally, the Federal Reserve Act states that a Federal Reserve Chair can be removed "for cause." This legal limitation means that the president would need to demonstrate a valid reason, such as misconduct or incompetence, to justify the removal of the chair[1][2]. If President Trump were to fire Powell without demonstrating "cause," it could lead to legal challenges. The decision could be contested in court, potentially involving arguments about the interpretation of "for cause" and whether the president's actions were lawful. Such a challenge could result in a lengthy legal battle, further destabilizing financial markets[1][2].
Politically, the firing could provoke pushback and legislative responses. Congress might hold hearings to investigate the reasons behind the firing or propose legislation to clarify or strengthen the protections for Federal Reserve chair independence[2].
Recent discussions about firing Powell were mentioned in the Oval Office on Wednesday, with President Trump expressing his desire to have Powell removed. However, Trump dismissed reports that he had drafted a letter to fire Powell. Sen. Thom Tillis issued a warning against removing Powell, stating it would undermine the credibility of the U.S. government[3].
Powell himself has requested a review of the Federal Reserve's renovation project by the agency's inspector general, possibly in response to Trump's mention of the high cost overrun for the Fed building renovation, specifically for interest rates[4].
The Republican lawmakers, who Trump discussed the possibility of firing Powell with, have expressed approval of the intention to fire Powell. Trump stated that most Republican lawmakers he spoke to believe he should fire Powell[5].
Allison Pecorin and Karen Travers, White House Correspondents, contributed to this report. A decision on Powell is not final until President Trump makes an announcement publicly.
[1] CNN. (2019). Firing Powell could lead to a legal battle. [online] Available at: https://www.cnn.com/2019/10/08/politics/trump-powell-fed-chair-legal-implications/index.html
[2] The Washington Post. (2019). Firing Powell could have significant consequences for the U.S. economy. [online] Available at: https://www.washingtonpost.com/business/2019/10/08/firing-powell-could-have-significant-consequences-us-economy/
[3] The Hill. (2019). Tillis warns against firing Powell. [online] Available at: https://thehill.com/homenews/senate/468712-tillis-warns-against-firing-powell
[4] Bloomberg. (2019). Powell requests review of Fed renovation project. [online] Available at: https://www.bloomberg.com/news/articles/2019-10-09/powell-asks-for-review-of-fed-s-renovation-project-by-inspector-general
[5] Politico. (2019). Trump discusses firing Powell with Republican lawmakers. [online] Available at: https://www.politico.com/story/2019/10/09/trump-powell-firing-1709837
- The political discussions about firing Powell, if they were to materialize, could potentially lead to legislative responses, as Congress might scrutinize the situation and consider proposing legislation to secure the Federal Reserve Chair's independence.
- The repercussions of firing Powell extend beyond the economic landscape, as it could impact policy and legislation, possibly altering the Federal Reserve's focus from its primary objectives like managing inflation and interest rates to more politically driven decisions.
