Washington: Removing Federal Reserve Chair Jerome Powell may not necessarily lead to the interest rate cuts President Donald Trump desires, according to experts. Chief Economist at JPMorgan, Michael Feroli, emphasized that the true power of the position stems from the respect traditionally accorded it, rather than any legal force.
According to Qatar News Agency, economist Peter Sidorov of Deutsche Bank cautioned that any attempt to impose a new chair could face resistance from the rest of the board, potentially increasing opposition to accommodative policy. Sidorov explained that while the Federal Reserve chairperson wields significant influence within the Federal Open Market Committee (FOMC), monetary policy decisions are made by majority vote. Therefore, removing Powell could provoke other members to resist attempts to sway the committee’s decisions toward accommodative monetary policy.
Market volatility has been exacerbated by Trump’s remarks, describing Powell as a “big loser,” which led to declines in stock and bond indices, as well as the US dollar. CNBC highlighted that the legality of Trump’s authority to remove Powell before the end of his term remains controversial. Powell has previously stated that his removal would be illegal. The political and economic sectors are closely watching a Supreme Court ruling on a challenge to Trump’s dismissal of members of federal agency boards, a case that might determine the future independence of the Federal Reserve.
The uncertainty surrounding potential changes in the Federal Reserve’s leadership is compounded by ongoing tariff-related tensions, adversely affecting investor confidence. Several financial experts have voiced concerns about compromising the central bank’s independence, warning that it could trigger a new wave of market selling and heightened inflation fears.
Feroli noted that undermining the Federal Reserve’s independence could elevate inflation expectations, which are already under upward pressure due to tariffs and current economic policies. He expressed hope that potential negative consequences would deter the president from further attempts to influence the central bank’s independence, despite Trump’s track record of acting on his intentions directly.