President Donald Trump publicly blasted Federal Reserve Chair Jerome Powell on Thursday, suggesting he is ready to seek the termination of the nation's most powerful economic policymaker despite the fact that the central bank is supposed to be an independent entity.
Trump took to social media to make his discontent known about Powell, saying the U.S. central bank is lagging behind its European counterpart. The European Central Bank later Thursday morning announced it is cutting interest rates for the seventh time in the past 12 months.
"Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete 'mess!'" Trump wrote. "Powell's termination cannot come fast enough!"
Trump's disdain towards Powell is not new. On Wednesday, the Fed Chair said the Trump administration has brought "very fundamental policy changes," including his sweeping tariffs that are "significantly larger than anticipated." He said such changes are unlike anything seen in modern history, putting the Fed in uncharted waters and on a path to confront a challenge it hasn't seen in decades: stagflation (a combination between economic stagnation and high inflation).
Similarly, back in November, Powell was asked whether he would step down if Trump asked him to resign. Powell gave an unusually blunt answer: "No." He later said that the removal or demotion of top Fed officials was "not permitted under the law."
Powell's termination may not be an easy task. The Fed is an apolitical institution, it makes monetary policy decisions without political considerations, with protection from political retribution.
In fact, the Fed's protection has legal precedent. In the landmark 1935 Supreme Court case Humphrey's Executor v. United States, the court held that the President may not remove an appointee to an independent regulatory agency except for reasons that Congress has provided by law. However, SCOTUS is about to hear a case that could determine the fate of such protection.
Moreover, Trump has already signed an executive order trying to seize more control over the central bank's responsibilities related to bank regulation. However, the order exempted the Fed's decisions on interest rates, which are voted on at every meeting by the seven members of the central bank's Board of Governors and a rotating set of five presidents from regional reserve banks.
Trump has also taken more direct aim at other independent agencies, including by firing officials at the Federal Trade Commission, the Merit Systems Protection Board and the National Labor Relations Board.
Earlier this month, Chief Justice John Roberts temporarily allowed the Trump administration to remove the leaders of two independent agencies while their challenges to the dismissals move forward in court.
Nevertheless, experts, including Powell, do not expect the court's decision to apply to the Fed, but that the central bank was "monitoring carefully" the situation, he said.
Eswar Prasad, a professor at Cornell University, called Trump's latest broadside at Powell and the Fed a "stunning and deeply disturbing attack" that could erode America's largest role in global financial markets. "Trump's assault on the Fed's independence, which is clearly just getting started, threatens to damage the Fed's monetary policy credibility and unravel domestic and foreign investors' faith in the dollar," he told The New York Times.
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