Mint Quick Edit | After the Greenspan put, the Powell stay-put
Summary
To the relief of markets, Trump said he doesn’t intend to fire the Federal Reserve chief. Is this because the US president changed his mind, the law won’t let him or a fall-guy is needed for an economic slowdown?US President Donald Trump said on Tuesday he has “no intention of firing" Jerome Powell, but would like to see the Federal Reserve chairperson be “a little more active" as far as cutting interest rates goes.
Also Read: Mint Quick Edit | Trump versus Powell on US Fed policy
Trump has been highly critical of Powell, describing him as “a major loser" and “Mr. Too Late" for not easing monetary policy in response to his unsubtle demands.
So, when reports emerged of Trump considering ways in which the Fed chief could be shunted out, not too many were surprised. Except that Powell dug in, making it quite clear that he couldn’t be ousted before the end of his term in 2026.
Also Read: The US Fed should inject itself with a good dose of humility
That Trump no longer seems keen to replace Powell has been welcomed by financial markets, a clear vote in favour of Fed independence. But then, another suspicion has gained traction. Now that the tariff-hit US economy looks set for a slowdown, or possibly even a recession, the White House may need a fall-guy to pin the blame on. A Fed chief who refuses to cheapen credit could be just the scapegoat that Trump’s MAGA fan base might buy.
Also Read: Powell versus Trump: Why Fed independence matters in times of turmoil
Even so, the US economy and the rest of us will fare better with a Fed policy that goes by economic logic, not politics.
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