By Andrea Shalal
The economic adviser of the White House of Washington (Reuters), Kevin Hassett, said on Friday that President Donald Trump and his team studied the question when they were asked if the flesh of the Federal Reserve Jerome Powell was an option, an indication that a question of great consequence for the independence of the Central Bank and for the world markets remained active by the White House.
“The president and his team will continue to study this question,” Hassett told the White House when a journalist asked whether “to fire Jay Powell is an option in a way that before”.
The exchange of Hassett with the press one day came after Trump accelerated a longtime quarrel with the Fed chair, accusing Powell of “doing politics” by not reducing interest rates and claiming that he had the power to expel Powell from his “really fast” work.
Hassett seemed to be distant from his book in 2021, “The Drift: Stopping America’s Slide to Socialism”, in which he argued that the dismissal of Powell during Trump’s first mandate would have harmed the Fed’s reputation as objective and independent manager of the country’s money supply and could have compromised the credibility of the dollar and crushed the stock market.
“I think that at that time, the market was a completely different place. And, you know, I refer to a legal analysis that we had at the time. And if there is a new legal analysis that says something different, then we must rethink our response,” said Hassett.
It was not immediately clear what new legal analysis he was referring, but a case on the question of whether Trump exceeded his authority in the dismissal of two democrats of the federal work commissions currently under the institution at the Supreme Court is closely a previous potential to know if Trump could withdraw Powell.
Powell said the law would not allow his dismissal, that he would not leave Trump asking him by Trump, and that he intended to serve until the end of his mandate in May 2026. Powell, whose mandate as a member of the Fed Governors’ Council extended until January 2028, also this week, he did not think that the current case of the USA
‘Not happy with him’
Powell, appointed for the first time to the Fed by President Barack Obama, was raised to the president of the Fed by Trump in his first mandate, but the republican president was quickly embittered for increased interest rates. Trump has reprimanded Powell several times in public and planned to try to dismiss him but never did it.
The question occurred again last week with Powell and other Fed officials saying that they believe that Trump’s aggressive prices could put them in a link with the potential for them to push inflation while harming overall economic growth and labor markets. Trump Thursday reprimanded Powell again for not having reduced rates.
“The Fed really owes the American people to reduce interest rates. This is the only thing it is good,” Trump said. “I’m not satisfied with him. If I want, he will be very quickly, believe me.”
The Fed, after a series of rate decreases at the end of last year, left its rate of reference policy awaiting 4.25% to 4.50% since December. Powell said this week that with high uncertainty about the effects that will come from prices and other administration policies, he and his colleagues are not in a hurry to change their waiting posture.
Hassett said it was focused on Fed’s political actions, not on personalities, and challenged the central bank’s decision to increase interest rates during Trump’s first mandate and characterize tax cuts as inflationists, but not to challenge “flight expenses” by former president Joe Biden, who, according to Hassett, was “inflation”.
“And so if you think it is unacceptable for President Trump to be frustrated by the political history of the Fed, then I think you have explanations to do,” he said.
Hassett said that Trump policies increased capital expenses and that job creation increased, while inflation was down.
“And therefore in this backdrop so that all those who refused to warn me against leaking spending, you know, saying:` `Oh, it will be a disaster for inflation because of the prices ”, means that people must, as, improve their models and improve their messages.”
Economists and investors followed the climbing with apprehension. The credibility of the Fed as the most powerful central bank in the world is largely based on its historical independence to act without political influence, and an effort to eliminate Powell could further pace the markets already beaten for weeks by the erratic approach of Trump to impose its new prices, with the deployment assailed by a mixture of delays, partial hikers and stops, with China in particular.
“A sudden crystallization of the threat to the independence of the Fed would intensify both the stress of the market and would move it in a more stagflationist direction with a strong increase in the risk of tail,” said Evercore ISI vice-president Krishna Guha, in a note.
(Report by Andrea Shalal and Kanishka Singh in Washington; Ann Saphir additional report in San Francisco, edition by Lisa Shumaker, Dan Burns and Franklin Paul)
