Despite recent threats from U.S. President Donald Trump that he could fire Federal Reserve Chairman Jerome Powell, economists and lawmakers agree that such a move is unlikely.
However, political pressure from Trump’s remarks could influence the Fed’s decision-making process.
Francesco Bianchi, an economics professor at Johns Hopkins University, told reporters that while Trump is not expected to follow through on his threats, his rhetoric on the issue could influence public perception and therefore the central bank’s actions. “The Fed now knows that if there is a recession, it will be blamed,” Bianchi said, adding that Trump’s public calls for rate cuts could increase pressure on policymakers.
The row erupted last week after Powell suggested there was no urgent need to cut interest rates, prompting Trump to respond with a stern warning that he could fire the Fed chair. The comments triggered a sharp stock market decline as investors worried the Fed’s independence was being compromised.
The chances of Trump actually firing Powell are slim, according to Bianchi. “Powell’s term is up in about a year,” he explained. “Firing him would create significant market turmoil that would outweigh any short-term political gains. Markets would likely interpret this as a sign of future rate hikes, not cuts.”
Amid the growing controversy, key lawmakers have rejected Trump’s comments, with Republican Senator John Kennedy of Louisiana and a member of the Senate Banking Committee rejecting the president’s assertion of authority over the central banker.
“I don’t think the president, any president, has the authority to remove the chairman of the Fed,” Kennedy said in an interview with NBC. “The Fed should remain independent.”
Speaking from the Oval Office on Thursday, Trump reiterated his claim, saying, “If I had called for his removal, believe me, he would have been removed very quickly.” But Kennedy continued to support Powell’s approach to monetary policy, particularly the president’s focus on controlling inflation.
*This is not investment advice.
