President Donald Trump indicated that it is “highly unlikely” he will dismiss the head of the US central bank, just hours after inquiring of lawmakers whether he should do so to his current head, Jerome Powell.
Stock markets and the US currency dropped on hearing that Trump had raised the prospect with Republicans on Tuesday, but then rebounded after Trump played down the talks.
Removing the chair of the Federal Reserve would be a significant departure from precedent. Trump has also repeatedly urged Powell to cut US interest rates in a series of sharply critical tirades, which continued on Wednesday when the president labelled him a “knucklehead” and said he was “doing a lousy job”.
Addressing the White House, the president admitted he had reignited speculation over sacking Powell, who Trump appointed to the job in his first term, but insisted he was “not planning on doing anything”.
Queried over whether he was eliminating the possibility, he replied: “It’s highly unlikely unless he has to leave for fraud. The president’s supporters have also weighed in with insults against Powell by charging the Fed chief with improperly handling the Federal Reserve building refurbishment.
Budget director Russell Vought last week demanded an investigation of cost overruns on a $2bn (£1.5bn) project to renovate Washington Fed buildings. Earlier this week, Trump declared he believed it was “sort of” an offence warranting a firing.
Deutsche Bank analysts said the recent turn of the attack’s focus indicated the administration was putting together a case against Powell. Whether or not the president acts on this case remains to be seen,” they wrote, adding that recent events “indicate that the risk has increased.”
The Federal Reserve was created by Congress and possesses policy-setting powers separate from the White House. Powell’s second term as chairman of the Fed expires next year in May, and he can remain as one of the governors of the central bank until 2028.
According to federal law, the president has the authority to terminate Fed governors short of their term “for cause”. The phrase generally suggests serious wrongdoing. Powell has consistently expressed his desire to complete his term as chair, refusing to admit that Trump can fire him for a policy dispute.
The Fed has also brusquely rejected the criticism of the renovations, adding information to its website to counter some of the assaults. It has been said that the renovations will ultimately reduce costs by allowing it to consolidate operations and blame the increase in expenses on “unforeseen conditions” such as more asbestos than anticipated.
Trump has toyed with the notion of dismissing Powell since his inaugural term, when he was opposed to the Fed increasing interest rates. He has kept retreating from the strategy in the face of investor unease, most recently this spring.
But on Tuesday, Republican congresswoman Anna Paulina Luna of Florida posted on social media that the dismissal was “imminent”. It came after other Trump allies in recent weeks hinted that Powell was resigning or demanded that he do so. A senior White House official told the BBC that Trump had signalled to Republicans that the dismissal of Powell was possible shortly.
