According to ChainCatcher, President Trump's public criticism of Federal Reserve Chairman Powell has intensified concerns about his potential attempt to dismiss the central bank chief. However, even if he takes this historically significant and legally controversial action, Trump may still be unable to steer monetary policy in his desired direction.
Many economists suggest that firing Powell would not necessarily result in the rate cuts Trump wants. Paul Ashworth, Chief North America Economist at Capital Economics, noted in a recent report: "Firing Powell would likely be just the first step in undermining the Fed's independence. If Trump is determined to lower interest rates, he would also need to fire the other six members of the Federal Reserve Board, which would trigger more severe market turmoil, causing the dollar to fall and the long end of the Treasury yield curve to rise."
Powell serves as both the Federal Reserve Board Chairman and the Chair of the Federal Open Market Committee (FOMC), which sets interest rate policy. Ashworth pointed out that while FOMC members typically choose to be led by the presidentially appointed board chairman, they can also defy Trump's wishes and select someone else to lead the rate-setting committee.
Trump referred to the Fed Chairman as a "big failure" in a social media post on Monday, which shook financial markets. White House Economic Advisor Kevin Hassett stated last week that the president and his team were exploring the possibility of removing the Fed Chairman. However, on Tuesday, Trump contradicted this by saying he would "undoubtedly" not fire Powell.
