Trump administration pushes back on report Trump could fire Fed chairman

White House press secretary Sarah Sanders told the Examiner in an email that she’s “aware of no plans” to fire Powell.

Trump is unhappy with Powell and the Fed over continuing interest rate hikes to the central bank’s benchmark lending rate. That raises interest rates across the economy and can have negative effects on the stock market, though other factors, like investor concerns over the Trump administration’s trade wars and a global economic slowdown, drove much of this month’s stock market slide.

“Feel the market, don’t just go by meaningless numbers. Good luck!,” Trump tweeted hours before the Fed announced it would hike its baseline lending rate to an upward limit of 2.5 percent, a rise of a quarter of a percentage point.

That remains well below where it has historically set rates; the Fed kept rates near zero for years following the 2008 global financial crisis as a way of helping the recovering economy regain strength. Trump has publicly argued that the Fed should keep rates low to help stave off the effects of his trade war with China.

Powell, whom Trump appointed along with most of the Federal Reserve Board, was peppered with questions by reporters about Trump’s statements during his Wednesday press conference about the rate decision. The Fed chairman said “political considerations play no role whatsoever in our decisions about monetary policy” and that the Fed will continue to make its choices based “solely on best information and analysis.”

But a removal of Powell, if even legally possible, would raise concerns that the Fed is no longer free to make its own decisions based on what it thinks is best for the long-term health of the economy, rather than politics. Congress intentionally made it difficult to remove Fed members that presidents disagree with, in an attempt to insulate the Fed’s actions from everyday politics.

The law says that the president can remove a Fed chairman “for cause.” That is different than other federal appointments in which a person may serve only at the will of the president, and it likely means Powell would have to do something illegal or against the rules of the Federal Reserve in order for Trump to legally be able to remove him.

Even if Trump did fire Powell as chairman, he would likely remain on the Fed’s board, meaning Powell could still vote and help determine interest rate actions, among other powers. Powell’s probable successor in the event of a removal, Vice Chairman Richard Clarida, a fellow Trump appointee, also voted for recent rate increases, as did every other member of the board.

As a J.P. Morgan financial analysis note put it: “We don’t think such a rearrangement would have an effect on the Fed’s monetary policy decisions, but it could prove very disruptive for financial markets.”

In addition to further shaking short-term investor confidence, such a move could also undermine the long-term credibility of the Fed and other U.S. economic institutions. The U.S. has long enjoyed an economic advantage with foreign investors over countries like Turkey, Venezuela, and Zimbabwe, where authoritarian governments dictate the actions of their central banks.

A Powell removal could also further drive a wedge between Trump and congressional Republicans. Several Republican senators praised Powell when asked about Trump’s criticisms earlier this year.

“After a long and dangerous experiment in monetary policy, conducted by others, Chairman Powell has gone a long way to restoring normalcy,” said Sen. Pat Toomey R-Pa., in a statement provided by a spokesperson. “I have no reason to believe that the president is planning to fire Chairman Powell. He certainly should not do so as Chairman Powell has done nothing to warrant being dismissed.”