Trump Considers Powell Dismissal Amid Market Concerns

US President Donald Trump and Treasury Secretary Scott Bessent have held secret meetings to discuss the potential dismissal of Federal Reserve Chair Jerome Powell. According to sources familiar with the matter, Bessent has cautioned Trump about the risks associated with such a move, including potential negative reactions from the markets, political and legal challenges, and the impact on the economy.

Bessent's warnings to Trump included the Fed's preparation to cut interest rates by the end of the year, the potential market backlash, and the legal hurdles that could arise from impeachment proceedings. Bessent argued that dismissing Powell was unnecessary, given the economy's current strength and the positive market response to Trump's policies.

The possibility of Powell's dismissal has been a topic of discussion for months, with Trump frequently criticizing the Fed's interest rate policies. Last week, a senior White House official reported that Trump was considering firing Powell during a meeting with Republican lawmakers. However, Trump later told reporters that he had no plans to do so.

The discussions briefly unsettled financial markets, as investors expressed concern that a politically motivated removal of central bank governors could undermine the Fed's independence and its ability to control inflation. Bessent has also reminded Trump that if Powell is removed, he could file a lawsuit, potentially delaying the case until May, when Powell's term ends.

Some advisers have indicated that if Powell is removed, Fed Vice Chair Philip Jefferson would serve as acting chairman. However, Jefferson is also a Biden appointee and close to Powell, which could complicate the situation. Additionally, the Senate's summer recess could make it difficult to quickly confirm a new presidential nominee.

Bessent has also conveyed to Trump that he will have the opportunity to make two key appointments at the beginning of 2025, which will determine the direction of the Fed. Fed Board Member Adriana Kugler's term ends in January, and Powell's in May, giving Trump the chance to establish his long-term influence over the Fed now.

The secret meetings between Trump and Bessent have sparked intense speculation about the future of Jerome Powell and the independence of the Federal Reserve. The potential dismissal of Powell would have significant implications for the US economy and financial markets, and it is unclear how the courts would rule on the matter. The meetings have also raised questions about the role of the Treasury Secretary in the dismissal of a Federal Reserve Chair and the separation of powers. The situation remains fluid, and it is uncertain how it will unfold in the coming weeks and months.