Donald Trump believes he has the authority to replace Jerome Powell at Fed
The US president has repeatedly criticised the central bank's monetary policy
US President Donald Trump has told confidants as recently as Wednesday that he believes he has the authority to replace Jerome Powell as chairman of the Federal Reserve Board, according to people familiar with the matter.
In Mr Trump’s line of thinking, he could demote Mr Powell to be a board governor, but is not planning to do so right now, the people added.
I think the law is clear that I have a four-year term, and I fully intend to serve it.
Jerome Powell, US Fed chairman
Their account of the president’s conversations emerged just hours after Mr Powell said he intends to serve his full four-year term despite Mr Trump’s continuing criticism of Fed policy. Earlier this year, Mr Trump asked White House lawyers to explore options for removing him.
The people, who requested anonymity to discuss internal White House deliberations, said that Mr Trump’s frustration with Treasury Secretary Steven Mnuchin is limited to his recommendation to pick Mr Powell as Fed chair. Mr Mnuchin is otherwise in good standing with the president, they said.
Mr Trump’s attacks on the Fed are a departure from almost three decades of caution in the White House about making public comments on monetary policy, out of respect for the independence of the central bank.
“I think the law is clear that I have a four-year term, and I fully intend to serve it,” Mr Powell said at a press conference in Washington on Wednesday after policymakers met to discuss interest rates. They left the benchmark rate unchanged, while opening the door to a rate cut later this year.
White House lawyers think there is a way to follow through with a demotion if that’s what the president wants, but there has been some disagreement in the Counsel’s office, according to a person familiar with the matter.
Asked about the president’s belief that he could demote Mr Powell, a White House spokesman declined to comment on a decision that was not currently being carried out.
Acting White House Chief of Staff Mick Mulvaney and Mr Trump’s chief economic adviser Larry Kudlow also declined to comment while at an event for the economist Arthur Laffer, who received the Presidential Medal of Freedom earlier Wednesday.
Kevin Hassett, the departing chairman of the White House Council of Economic Advisers, said “one hundred per cent he won’t do it,” referring to Mr Trump’s consideration of demoting Mr Powell. Asked if Mr Trump should do that, Mr Hassett responded: “No.”
Mr Trump has repeatedly accused Mr Powell of not doing enough to bolster the economy. The president has called for lower interest rates as he seeks to offset the headwinds created by his trade war with China and to create a favourable backdrop for his re-election campaign next year.
Mr Trump told ABC News last week that he disagreed with Mr Powell “entirely,” adding that “if we had a different person in the Federal Reserve that wouldn’t have raised interest rates so much,” economic growth would have been stronger.
The Federal Reserve Act provides explicit protection for Fed governors against removal by the president except “for cause”. Courts have interpreted the phrase to require proof of some form of legal misconduct or neglect of basic duties. A disagreement over monetary policy wouldn’t meet that bar.
It is less clear, however, whether the president can demote a chair, removing him or her from the top position while leaving the person as a Fed governor.
Updated: June 20, 2019 11:39 AM