Trump refutes reports of potential firing of Fed Chair Powell amid Fed independence concerns - CNBC

Trump refutes reports of potential firing of Fed Chair Powell amid Fed independence concerns - CNBC

In a surprising turn of events, President Donald Trump has refuted reports of his potential firing of Federal Reserve Chair Jerome Powell, despite earlier indications that he was considering the move. This development comes amidst ongoing concerns about the Fed's independence and Trump's dissatisfaction with the central bank's interest rate policies.

Less than 24 hours ago, Trump reportedly discussed the possibility of firing Powell with a group of House Republicans, according to CBS News [2]. The president had previously expressed frustration with Powell's handling of interest rates, which he believes are too high. However, in an Oval Office press opportunity on Wednesday, Trump stated that it was "highly unlikely" that he would attempt to remove Powell from his position, a move that would potentially trigger months of litigation and shake up financial markets [1].

Trump's denial appeared to be a reversal of his earlier stance. He had shown lawmakers a draft of a letter to Powell informing him that he'd been fired, according to The New York Times. Trump's allies in the administration and on Capitol Hill have been assailing Powell over a longstanding effort to renovate the Fed's Washington, D.C. headquarters, accusing the central banker of unspecified fraud over the costly fix-up project [1].

The Federal Reserve's independence from political influence is a cornerstone of U.S. monetary policy. The law requires "cause" for the removal of a Fed chair, and the legal precedent for such an action is unclear. The U.S. Supreme Court has indicated that Trump may not have the authority to fire Powell, as the Federal Reserve is a "uniquely structured, quasi-private entity" [2].

The meeting with House Republicans comes as the odds of a July rate cut have declined to 2.6%, according to financial markets. Powell's term as Fed chair ends in May 2026, and his potential removal could have significant implications for the U.S. economy and financial markets.

The recent escalation in President Donald Trump's criticism of Federal Reserve Chair Jerome Powell has injected notable uncertainty into financial markets. Trump's public denouncement of Powell’s performance and the suggestion of a potential firing—though officially denied—have unsettled investors. This political tension has led to increased volatility, particularly visible in the cryptocurrency market where Bitcoin’s price surged above $119,500 before stabilizing around $119,650, marking a 2% gain within 24 hours according to CoinGecko data [3].

While Trump’s rhetoric raises questions about the Fed’s independence, experts suggest such political interference could destabilize traditional assets like stocks and bonds, yet potentially bolster alternative stores of value such as Bitcoin and gold. According to COINOTAG, “Testing the Fed’s independence could be detrimental to conventional markets but advantageous for decentralized assets that serve as hedges against monetary policy uncertainty” [3].

References:
[1] https://www.the-independent.com/news/world/americas/us-politics/trump-fed-chair-powell-firing-b2790306.html
[2] https://www.ainvest.com/news/fed-chair-powell-removal-imminent-trump-considers-firing-rate-cut-odds-fading-2507/
[3] https://en.coinotag.com/experts-suggest-bitcoin-could-benefit-if-trump-challenges-fed-chair-powells-independence/