US President Donald Trump said Wednesday that he was not currently planning to fire Federal Reserve Chair Jerome Powell, but added that he did not rule it out.
Trump’s mixed messaging, after months of escalating attacks on the independent central bank chief, sent the yield on the 30-year US Treasury bond surging above five percent.
Asked about whether he would eject Powell, Trump said he is “doing a lousy job but no, I’m not talking about that.”
“I don’t rule out anything, but I think it’s highly unlikely,” he added.
Trump noted that he would in any case be able to make a change at the top of the Fed when Powell’s term ends next year.
“We’ll pick somebody that’s good,” Trump said. “We want to see lower interest rates.”
Powell’s term at the helm of the US central bank does not conclude until May 2026, and his term as a Fed governor is up at a later date.
The Fed chair has said that he did not plan to step down early, and considers the central bank’s independence over monetary policy to be a matter of law.
A Supreme Court order recently suggested that Fed officials cannot be taken out of their jobs over policy disagreements, meaning they have to be removed “for cause,” which could be interpreted to mean wrongdoing.
Fireable offense?
The US leader has repeatedly lashed out at Powell for not lowering interest rates more quickly, calling the central banker a “numbskull” and “moron” recently.
Late Tuesday, Trump suggested that a $2.5 billion renovation plan at the Fed could be sufficient cause to force Powell out. Asked by a reporter if the spending was a fireable offense, Trump said: “I think it sort of is.”
The US leader on Wednesday floated the possibility of “fraud” involved with the renovation, but provided no details substantiating the allegation.
The president has received political backing from his party for firing the Fed chair, US media reported Wednesday, noting that he told a room of Republican lawmakers that he would do so.
A White House official told CNBC: “They expressed approval for firing him. The president indicated he likely will soon.”
The New York Times reported that Trump showed off a draft letter to oust Powell at his meeting with about a dozen House Republicans late Tuesday, although the president said Wednesday that he only “talked about the concept” of removing Powell instead.
Trump added Wednesday that many people want the top job at the Fed, saying: “I think it’s one of the easiest jobs in government, you show up once a month and you make a statement about where the economy is going, and we’re going to raise or lower interest rates.”
Financial markets took a hit after reports about Trump’s plans, although they recouped some losses after his later remarks.
The dollar initially fell by one percent against the euro before regaining ground, while safe haven asset gold logged gains.
Wall Street’s main indexes stumbled, while the yield on the 30-year US bond surged on market worries.
The Dow Jones Industrial Average was flat while the broad-based S&P 500 Index and tech-focused Nasdaq both lost 0.1 percent.
Major stock markets stumbled on Wednesday after reports that US President Donald Trump was close to firing the head of the Federal Reserve in a dispute over interest rates.
The yield demanded by investors in 30-year US bonds surged above five percent meanwhile, indicating heightened anxiety over the prospect of Powell’s removal, which would break the tradition of the US central bank operating independently.
Europe’s main markets dropped at the close and Wall Street dipped, while the dollar lost more than one percent against the euro following several media reports about Trump’s stance on Fed chairman Jerome Powell.
Trump later played down the rumours after being asked by reporters at the White House, saying it was “highly unlikely,” though he said he had not ruled it out.
The Fed has held its benchmark lending rate steady since its last reduction in December despite pressure from Trump.
The president has repeatedly lashed out at Powell for not cutting interest rates sooner.
On Tuesday, Powell repeated his message that the central bank was waiting for the impact of Trump’s tariffs before deciding on further rate cuts.
“As the US economy is in solid shape, we think that the prudent thing to do is to wait and learn more and see what those effects might be,” he said.
– Europe indexes dip –
Wall Street and Europe’s leading stock indexes gave up earlier modest gains made as traders weighed whether Trump’s trade tariffs could be fuelling inflation, raising pressure on the Fed for interest rate cuts.
Analysts said the latest relatively benign US inflation data had dampened the prospect of cuts, despite pressure from Trump as an August 1 deadline looms for his latest tariff threat to several economies.
After the June consumer price index showed increased pricing pressure following US tariffs, the producer price index was unchanged on a month-on-month basis, cooling from a 0.3 percent rise in May.
“Signs of tariff-driven inflation are already starting to show, as some companies begin passing on higher costs to consumers,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.
Other analysts voiced caution on the tariffs’ effect.
“Looking into the underlying data, it was apparent that tariffs were not to blame for the inflation uptick” in June, said David Morrison, senior market analyst at finance group Trade Nation.
“Instead, it was the services side of the US economy which has seen the biggest cost increases. That would suggest that tariffs could add even more to inflation, making the Federal Reserve less likely to cut interest rates further, thereby stoking President Trump’s anger.”
Tech firms pared earlier strong gains Wednesday after US titan Nvidia said it would resume exports of key chips to China following Washington’s pledge to remove licensing curbs.
California-based Nvidia, one of the world’s most valuable companies, said Tuesday it would restart sales of its H20 artificial intelligence semiconductors to China, having been stopped by Trump’s tightened export licensing requirements in April.
CEO Jensen Huang said they would be shipping “very soon”.
– Key figures at around 1540 GMT –
New York – Dow: DOWN 0.5 percent at 43,789.22 points
New York – S&P 500: DOWN 0.6 percent at 6,206.16
New York – Nasdaq Composite: DOWN 0.7 percent at 20,525.19
London – FTSE 100: DOWN 0.1 percent at 8,926.55 points (close)
Paris – CAC 40: DOWN 0.6 percent at 7,722.09 (close)
Frankfurt – DAX: DOWN 0.2 percent at 24,009.38 (close)
Tokyo – Nikkei 225: FLAT at 39,663.40 (close)
Hong Kong – Hang Seng Index: DOWN 0.3 percent at 24,517.76 (close)
Shanghai – Composite: FLAT at 3,503.78 (close)
Euro/dollar: UP at $1.1704 from $1.1606 on Tuesday
Pound/dollar: UP at $1.3469 from $1.3383
Dollar/yen: DOWN at 147.06 yen from 148.85 yen
Euro/pound: UP at 86.90 pence from 86.69 pence
West Texas Intermediate: DOWN 1.1 percent at $65.78 per barrel
Brent North Sea Crude: DOWN 0.96 percent at $68.05 per barrel
Via AFP