New York — The US dollar fell on Wednesday on news reports that US President Donald Trump is planning to fire Federal Reserve chair Jerome Powell, but later pared the drop after Trump denied the plans.
Trump said he was not planning to fire Powell even as he unleashed a fresh round of criticism against the central bank chief and declined to completely reject the possibility of ousting him.
A Bloomberg report earlier Wednesday that the president was likely to fire Powell soon sparked a drop in stocks and the dollar, and a rise in treasury yields. The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, was last down 0.19% on the day at 98.38, with the euro up 0.27% at $1.1629. Against the Japanese yen, the dollar weakened 0.43% to 148.22. Sterling strengthened 0.28% to $1.3415.
Trump, who criticises Powell almost daily for not cutting interest rates, said the report was untrue. However, he confirmed he had floated the idea with Republican legislators on Tuesday evening, marking the latest chapter in an escalating campaign of pressure by Trump against the Fed and its chief.
“I don’t rule out anything, but I think it’s highly unlikely unless he has to leave for fraud,” Trump said, a reference to recent White House and Republican legislator criticism of cost overruns in the $2.5bn renovation of the Fed’s historic headquarters in Washington. There has been no indication of fraud, and the Fed has pushed back on that criticism.
Trump’s comments included a now familiar complaint that Powell should have already cut interest rates and is a “terrible” chair. He has also called him “stubborn” and “stupid”.
As Trump downplayed the possibility of firing Powell, Republican senator Thom Tillis used his time on the Senate floor to deliver a spirited defence of an independent Fed, which economists say is the linchpin of US financial and price stability.
“There’s been some talk about potentially firing the Fed chair,” said Tillis, a member of the Senate banking committee that oversees the Fed and confirms presidential nominations to its board. Subjecting the Fed to direct presidential control would be a “huge mistake”, he said.
“The consequences of firing a Fed chair, just because political people don’t agree with that economic decision, will be to undermine the credibility of the US and I would argue if it happens you are going to see a pretty immediate response, and we’ve got to avoid that,” Tillis said.
Asked if it would be a problem for Trump to fire Powell, Senate majority leader John Thune told reporters: “My understanding is he doesn’t have any intention of doing that.
“President Trump’s own analysis and that of his treasury secretary is that he cannot fire Jay Powell,” House financial services committee chair French Hill told CNBC earlier on Wednesday.
Powell, who was nominated by Trump in late 2017 to lead the Fed and then nominated for a second term by Democratic president Joe Biden four years later, has repeatedly said he intends to serve out his term that goes through May 15 2026.
A recent Supreme Court opinion has solidified a long-standing interpretation of the law that the Fed chair cannot be fired over policy differences but only “for cause.”
Last week, the White House appeared to try to lay the groundwork for that when the director of the office of management and budget, Russell Vought, sent Powell a letter saying Trump was “extremely troubled” by the renovations of two Fed buildings.
Powell responded by asking the US central bank’s inspector-general to review the project, and the central bank posted a “frequently asked questions” fact sheet, which rebutted some of Vought’s assertions about VIP dining rooms and elevators that he said added to the costs.
The Fed’s decision to keep its policy rate in the 4.25%-4.50% range while it assesses the impact of the Trump administration’s tariffs on inflation has drawn Trump’s increasing ire.
The “formal process” for identifying a successor to Powell is under way, treasury secretary Scott Bessent has said.
Bessent is one candidate for the job, along with White House economic adviser Kevin Hassett, former Fed governor Kevin Warsh and current Fed governor Christopher Waller.
Reuters
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