White House economic adviser Kevin Hassett said President Trump and his team were studying the issue Friday when asked if Federal Reserve Chairman Jerome Powell was an option.
“The president and his team will continue to study that important,” Hassett said at the White House when reporters asked “whether firing Jay Powell is an option in the previous way?”
Hassett’s interaction with the media accused Powell of “playing politics” by claiming that he has the power to “really fast” to drive Powell out, not cutting interest rates.
Trump doubled his criticism of Powell on Friday, telling reporters at an oval office event:
Hassett appeared to be distanced from his 2021 book, The Drift: America’s Slide to Socialism. He claimed that firing Powell during Trump’s first term would undermine the Fed’s reputation as an objective and independent manager, potentially undermining the reliability of the dollar, causing the stock market to crash.
“I think the market was a whole different place back then. And you know, we were referring to the legal analysis we had at the time. And if there’s a new legal analysis that says something different, we need to rethink our response,” Hassett said.
It was not immediately clear what new legal analysis he was referring to, but the incident surrounding Trump has surpassed his authority to fire two Democrats from the currently pending Federal Labor Commission in the Supreme Court is closely monitored as a potential precedent for whether Trump can eliminate Powell.
Powell said that if asked by Trump that the law would not allow him to be removed, he would not leave, saying he would intend to serve until the end of his term in May 2026. Powell said this week he doesn’t believe the current lawsuit over appeal in the U.S. High Court would apply to the Fed.
“I’m not satisfied with him.”
First appointed by President Barack Obama, Powell was promoted to pastoral chairs by Trump during his first term, but the Republican president quickly exacerbated him by raising interest rates. Trump repeatedly publicly accused Powell and tried to fire him, but never did.
The issue came again last week, saying that Powell and other Fed officials believe Trump’s aggressive tariffs could be bound by the possibility of boosting inflation while damaging overall economic growth and the labour market. Trump on Thursday again punished Powell for not cutting interest rates.
“The Fed really owes Americans to lower interest rates, and that’s just what he’s good,” Trump said. “I’m not happy with him. If I want to get him out of there, he’ll trust me and come out really fast.”
The Fed has put on hold benchmark policy rates in the range of 4.25% to 4.50% since December after a series of rate cuts. Powell has shown this week that he and his colleagues are not in a hurry to change their meeting position as uncertainty increases over the impact that tariffs and other administrative policies will likely pose.
Hassett said he focuses on the Fed’s policy action rather than personality, and has been troubled by the central bank’s decision to raise interest rates during Trump’s first term, characterizing the tax hike as inflation, but that former President Joe Biden has no problems with “run-control spending.”
“So, if you think it’s unacceptable for President Trump to be unhappy with the Fed’s policy history, I think you have some things to do,” he said.
Hassett said Trump’s policies have boosted capital expenditures and increased job creation, but inflation is declining.
“And to everyone who refuses to warn about out-of-control spending, say, ‘Oh, this is going to be an inflation catastrophe due to tariffs’, meaning people need to improve their models and improve their messaging. ”
Economists and investors follow a fearful escalation. The Fed’s credibility as the world’s most powerful central bank depends heavily on his historic independence to act freely from political influence, and efforts to eliminate Powell could already be abused by Trump’s unstable approach to impose his new tariffs by enduring a mix of Delay, partial rollbacks and escalates.
“The sudden crystallization of the threat to FRED’s independence will strengthen the stress of the market and dramatically increase the risk of tails, and shift it towards more male dogs,” Evercore ISI vice-chairman Krishna Guha said in a memo.
