The possibility of US President Donald Trump dismissing Fed Chair Jerome Powell has been raised again.
National Economic Council Director Kevin Hassett said today that Trump may fire Powell due to cost overruns on the Fed’s headquarters renovation project.
It’s well known that the Trump administration has been pressuring Powell to cut interest rates for a long time. This pressure has fueled concerns about the Fed’s independence, and the mere possibility of Powell’s dismissal has previously significantly shaken markets. Indeed, earlier this year, even such a rumor triggered a rise in interest rates and a sell-off in the markets.
Although Trump said last Friday that he would not fire Powell, Hassett’s statements indicated that the possibility could be on the table again.
The White House has ratcheted up the pressure by alleging a $700 million budget overrun on the Fed’s Washington headquarters renovation project. On July 10, Office of Budget and Management Director Russ Vought sent a letter to Powell, questioning the project and requesting clarification on its legality.
Vought’s letter gives Powell seven business days to respond, which falls at the end of this week and could give Trump the opportunity to take action before the next Fed meeting begins on July 29.
Speaking to ABC, Hassett said, “Whether the president will pursue this path depends on the Fed’s response.” When asked whether Trump could fire Powell, Hassett said, “That’s under review, but if there’s a justification, yes, he could.”
Jerome Powell’s term expires in May. Meanwhile, speculation that Hassett could succeed Powell is gaining traction. Economic circles consider Hassett, one of the most influential figures in the White House, a strong candidate.
*This is not investment advice.