President Donald Trump discussed the resignation of Federal Reserve Chairman Jerome Powell as his frustration with the central bank intensified after rising interest rates and months of losses in the stock market, according to four people familiar with the Fed. subject matter.
Counselors close to Trump are not convinced that he would act against Powell and expect the president's latest outbreak of anger to disappear during the holidays, the people said on condition of anonymity. Some of Trump's advisers warned him that firing Powell would be a disastrous step.
However, the president spoke in particular about Powell's dismissal many times in recent days, two people said.
Any attempt by Trump to oust Powell would have potentially devastating effects on the financial markets, undermining investor confidence in the central bank's ability to shepherd the economy without political interference. It would come as markets tumbled in recent weeks, with major stock indexes already dipping dramatically in the year.
White House spokesmen declined to comment, as did Fed spokeswoman Michelle Smith.
Trump's public and private complaints about the members of his administration were often a first step toward his exits – including former Attorney General Jeff Sessions, his first Secretary of State Rex Tillerson, and Chief of Staff John Kelly.
It is unclear how much legal authority the president has to fire Powell. The Federal Reserve Act says that governors may be "removed because of the president." As the president is also a governor, this probably extends to him, but the rules around dismissing the leader are legally ambiguous, such as Peter Conti-Brown. the University of Pennsylvania notes in its book on the independence of the Fed.
Such a move would pose an unprecedented challenge to the Fed's independence. Although he was appointed by the president, Powell was thought to be cut off from Trump's dissatisfaction with a tradition of respect for central bank independence.
This separation of monetary policy policy should instill confidence that Fed officials will do what is right for the economy in the long run, rather than bow to the short-term whims of a politician.
Trump's frustration with Powell has intensified a lot in recent days, two people said. Although Trump's goal is to prevent interest rate hikes slowing economic growth, such a move can backfire on already turbulent financial markets.
Even routine changes at the top of the central banks create uncertainty in the markets as investors try to gauge how difficult a new leader can be by preventing the economy from overheating and accelerating inflation. Another problem with firing a Fed boss may be finding a replacement who wants to ensure he or she will not succumb to the same fate as Powell.
Trump is in the midst of a jolt of his administration. Since the November elections, he has announced the departures of Sessions, Kelly, Home Secretary Ryan Zinke and Secretary of Defense James Mattis. At the same time, a partial shutdown of the federal government has increased the sentiment among investors of disorder in Washington.
Shares have seen their worst week since 2011, with the S & P 500 falling 7.1 percent and Nasdaq Composite falling into a bear market. Trump attributed much of the blame to the Fed, saying at one point in October that the central bank was "crazy" about raising rates.
Part of Trump's anger was directed at Treasury Secretary Steven Mnuchin for his part in persuading the president to choose Powell to lead the Fed.
Powell bore the brunt of criticism recently, peppered with public complaints about the president's interest rates and at least one of his aides. Less than two weeks ago, prior to the Fed's recent decision, Trump said Powell was "being too aggressive, too aggressive, too aggressive." He told Reuters that the central bank "would be silly" to continue raising rates.
The Fed announced an interest rate hike on Wednesday and Powell signaled he will be more cautious about tightening next year. But investor concerns over the president's comments have prompted US stocks to post their biggest declines on any day of the Federal Open Market Committee's announcement since 2011.