President Trump has escalated his attacks against Fed Chair Jerome Powell and renewed his calls for him to resign immediately. This latest attack was in a Truth Social post in which Trump said Powell “should resign immediately.”
This particular attack included a link to an article in which a federal housing regulator called for the Fed chair to be investigated with regard to his testimony on the renovations that were done to the headquarters of the Federal Reserve in Washington.
During Trump’s first stint at the White House, he nominated Jerome Powell to head the Federal Reserve. Since then, Trump has repeatedly called out Powell for declining to slash interest rates. However, it isn’t clear whether a sitting U.S. president can legally remove a Fed chair from office. Trump himself earlier this year indicated that he wasn’t interested in firing Powell.
Trump wants the Fed to slash interest rates as a way of stimulating economic growth. The Fed counters that interest rates would’ve been cut already if Trump’s tariff announcements hadn’t muddled the economic outlook of the country.
Powell reiterated this position during a recent meeting in Portugal by central bankers. While responding to a question about whether or not the Fed could have cut interest rates further if sweeping tariffs hadn’t been announced by Trump, Powell responded that the Fed would have made further cuts.
Powell is currently serving out a term in office that he secured at the start of Biden’s presidential term. He came into office during Trump’s first term and when Trump was reelected president last year, Jerome Powell revealed that he wouldn’t step down from office if Trump asked him to. Powell added that the law doesn’t permit a sitting president to compel a Fed chair to leave office.
However, President Trump has a history of disregarding political norms and has, in the past, fired a number of independent regulators. These actions have been challenged in courts of law. It wouldn’t therefore be new for Trump to try and test the limits of his powers by firing the Fed chair.
The broader concern in this simmering conflict between Trump and the Fed chair is how confidence in the economic direction of the country would be impacted if the independence of the Federal Reserve is further threatened by politicians like the president. Entities like Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) with considerable holdings within the banking sector are likely to closely watch these developments in order to ascertain how their investments could be affected if the vitriol from Trump takes a turn for the worse.
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