Kevin Hassett, the departing chairman of the White House Council of Economic Advisers, said “one hundred percent he won’t do it,” referring to Trump’s consideration of demoting Powell. Asked if Trump should do that, Hassett responded: “No.”
Powell in the last six months has done a U-turn on monetary policy, although the shift may not be fast enough for Trump. Powell in December raised rates and signaled two more increases for the year, roiling financial markets. After walking back that guidance over the past six months, Powell on Wednesday held rates and opened the door to a cut next month in the face of deteriorating global growth and weak inflation.
Trump has repeatedly accused Powell of not doing enough to bolster the economy. The president has called for lower interest rates as he seeks to offset the headwinds created by his trade war with China and to create a favorable backdrop for his re-election campaign next year.
Trump told ABC News Friday that he disagreed with Powell “entirely,” adding that “if we had a different person in the Federal Reserve that wouldn’t have raised interest rates so much,” economic growth would have been stronger.
In creating the Fed, Congress effectively delegated its constitutional power “to coin money” and regulate its value to the central bank.
When former Chair Janet Yellen was preparing to take over the Fed in 2014, her predecessor, Ben Bernanke, gave her some advice: Remember that “Congress is our boss.”
The Federal Reserve Act provides explicit protection for Fed governors against removal by the president except “for cause.” Courts have interpreted the phrase to require proof of some form of legal misconduct or neglect of basic duties. A disagreement over monetary policy wouldn’t meet that bar.
It’s less clear, however, whether the president can demote a chair, removing him or her from the top position while leaving the person as a Fed governor.
This article was provided by Bloomberg News.