Trump's vow to end Powell's term could shock markets
American Treasury Secretary Scott Bessent warns the White House that attempting to dismiss the head of the Federal Reserve, the central bank, Jerome Powell, could involve the risk of destabilizing financial markets, Politico reported on Thursday.
What do you need to know?
- U.S. Treasury Secretary Scott Bessent warns the White House against attempting to dismiss Jerome Powell, the head of the Federal Reserve. According to Bessent, such an action could destabilize financial markets, which are already experiencing uncertainty.
- President Donald Trump publicly criticized Powell on the Truth Social platform. Trump stated that Powell's term should end as soon as possible, accusing him of making wrong decisions regarding interest rates.
- Despite the criticism, Powell's position is not currently threatened. Politico emphasizes that any attempts to remove Powell could end up in court.
Will Powell's dismissal destabilize the markets?
According to the portal, which cites anonymous sources, the Treasury Secretary warns White House representatives that any attempts to remove Powell from his position would destabilize markets, already feeling uncertain due to tariffs announced by Donald Trump.
On Thursday, U.S. President Donald Trump attacked Powell on his social media platform, Truth Social. In his post, he stated that Powell "issued a report which was another, and typical, complete 'mess!'" Trump also wrote that Powell is "always TOO LATE AND WRONG." According to the president, the Fed head "should have lowered interest rates a long time ago" like the European Central Bank, and "he should certainly lower them now. Powell’s termination cannot come fast enough," the president added.
On Thursday, the ECB lowered interest rates for the seventh consecutive time to support economic growth amid the threat posed by the trade war started by Trump.
Is Powell to be a scapegoat?
As Politico emphasized, by publishing such a post, Trump may have wanted to portray Powell as a future scapegoat responsible for problems in the American economy. The president may also want to increase pressure on the central bank head to capitulate and lower interest rates.
In Politico's assessment, Powell's position is not currently in danger. The service notes that any attempts to remove Powell from his position would likely end up in court. His term is set to last another year, so it's possible that Trump will just want to "wait him out."
What are the consequences for the U.S. economy?
This was not Trump's first attack on Powell, whom the president himself appointed to this position during his first term. In January this year, when Powell did not lower interest rates, Trump stated that the Federal Reserve and its head did not handle inflation and did a "terrible job" regulating banks. He also announced that he would stop inflation himself.
According to Reuters, the central bank's interest rates in the U.S. have not changed since December last year. It added that Trump criticized Powell after his statement on Wednesday, in which the Fed head said that "the independence is very widely understood and supported in Washington and in Congress where it really matters."
