White House warned: Powell's removal could jolt markets
American Treasury Secretary Scott Bessent warns the White House that attempting to dismiss Jerome Powell, the head of the Federal Reserve, could risk destabilizing financial markets, as reported by Politico on Thursday.
What do you need to know?
- U.S. Treasury Secretary Scott Bessent cautions the White House against removing Jerome Powell from his role as head of the Federal Reserve. Bessent warns that such an action could destabilize financial markets, which are already facing uncertainty.
- President Donald Trump publicly criticized Powell on the Truth Social platform. Trump insisted that Powell's term should end as soon as possible, accusing him of making poor decisions regarding interest rates.
- Despite the criticism, Powell's position is not currently at risk. Politico notes that any attempts to dismiss Powell could lead to legal proceedings.
Will Powell's dismissal destabilize the markets?
According to sources cited by the portal, the Treasury Secretary warns White House representatives that any efforts to remove Powell could worsen market instability already heightened by the tariffs announced by Donald Trump.
On Thursday, U.S. President Donald Trump criticized Powell on his social media platform, Truth Social. In his post, he declared that Powell "issued a report which was another, and typical, complete 'mess!'" Trump described Powell as "always TOO LATE AND WRONG," adding that he "should have lowered interest rates a long time ago" like the European Central Bank, and urged for immediate action. "He should certainly lower them now. Powell’s termination cannot come fast enough," he concluded.
On the same day, the ECB lowered interest rates for the seventh consecutive time to support economic growth, amid threats posed by the trade war initiated by Trump.
Is Powell to be a scapegoat?
As Politico highlighted, Trump may be trying to position Powell as a scapegoat for any potential economic issues. The president might also be attempting to pressure the central bank head into lowering interest rates.
According to Politico, Powell's position is currently secure. The service suggests that any attempt to remove Powell would likely result in a court battle. His term is set to last another year, which means Trump might opt to just "wait him out."
What are the consequences for the U.S. economy?
This is not Trump's first attack on Powell, whom he appointed during his first term. In January, when Powell did not lower interest rates, Trump criticized both the Federal Reserve and its leader for failing to manage inflation effectively, calling their performance in bank regulation "terrible." He also promised to tackle inflation himself.
According to Reuters, U.S. central bank interest rates have remained unchanged since December of last year. It reported that Trump criticized Powell following a statement on Wednesday in which the Fed head emphasized that "independence is very widely understood and supported in Washington and in Congress where it really matters."
