As if it were not enough with the soap opera of tariffs now the soap opera of Trump vs Powell Add a new chapter, perhaps, inspired by a famous Hollywood movie. Is that although in the middle of last month President Trump denied the possibility of throwing the head of the Fed, Jerome Powell, Already less than 48 hours that the Federal Open Market Committee (FOMC) decided to keep interest rates, The White House tenant rambling against the central banker. But this time little more that called the members of the Board of Directors of the Fed to a “revolution” against Powell.
Through the social network social social he wrote: “Jerome” Too Late “Powell, a stubborn fool, must substantially lower interest rates, now! If you continue to refuse, the Board of Directors should assume control and do what everyone knows that it should be done. “In this way, Trump seems to inspire a kind of” the Mutiny of Caine “in the Fed bosom, and no longer nicknamed Powell as” Mr. Too Late ”but directly crying out an internal rebellion.
It should be noted that This new onslaught of the novel Trump vs Powell occurs after the Fed decided, at its last monetary policy meetingkeep the rates without changes, in the range of 4.25%-4.50%, and in what is the fifth consecutive pause of its current flexibility cycle. The decision was made with dissent since it had the vote against Michelle Bowman and Christopher Waller, who supported reducing the objective range for the federal fund rate by 25 basic points (it is the first time that several governors break with most in a decision on the rates since 1993). The unanimity in the vote did not surprise the analysts because they expected the dissidents to want to congratate Trump who is still looking for candidates to succeed Powell.
No hair on the tongue, either in style Trump, reiterated his threats to throw Powell from the Fed, Then the new pause in the flexibility cycle: “Jerome” Too Late “Powell has made it again! He arrived too late and, in fact, too furious, too stupid and too political, to occupy the presidency of the Federal Reserve. In other words,” Too Late “is a total failure, and our country is paying the consequences.”
It is worth remembering that It is not the first time that Trump urges the Fed Board to act. Last month he pointed out that “housing in our country is behind because Jerome” too late “Powell refuses to lower interest rates. Families are harmed because interest rates are too high, and even our country has to pay a higher rate than it should be due to“ too late. ”Our rate should be three points lower than the current one, saving us one billion dollars a year (as a country). Federal simply does not understand.
It cannot be ignored that, from the regulatory point of view, Powell ends his mandate in May 2026 and is clear that he will not continue at the head of the Fedalthough the doubt now is whether this period will complete, since rumors about a possible dismissal do not stop flying the market. However, In recent months, both Trump and some of the highest officials of his administration such as Treasury Secretary Scott Besent, have had to clear doubts about Powell’s continuity, before certain turbulence of the markets. Although, they said they did not rule out anything, but they believed it very unlikely, unless they have to go for fraud, they ironized. While investors normally like the perspective of feat cuts, Trump’s possible interference could be considered excessive by much of the market.
Last month, even a meeting between Trump and Republican legislators in which Powell’s dismissal was discussed. Moreover, Trump went to visit the headquarters of the Fed, which aroused innumerable conjectures, although he masked to see how the building’s refaction process was going. In this regard, this issue raised several voices criticizing that the FED had gone from the original budget in more than US $ 700 million to a total of US $ 2,500 million to do, among other things, landscaped terraces on the roof, sources, VIP elevators and top quality marble. According to Russell Vought, director of the Office of Administration and Budget, the cost of renewal is already more than US $ 1,900 per M2, twice the cost of the renewal of a common historical federal building.
In the Polymarket predictions, the chances of Trump to dismiss Powell in 2025 shot up to 40%, before going back to 20% when the president seemed to reverse.
Powell would deplete his mandate as president in May 2026 and as governor (member of the committee) in 2028. From the internal legal point of view, Trump does not have the legal capacity to dismiss him as president, except for reasons of undue conduct (fraud or disability). The legal precedent of 1935, Humphrey’s Executor vs. United States, limits the president’s ability to remove high positions from independent agencies without just cause.
However, this legal consensus is being tested in the Supreme Court, with several cases open for dismissals of executive positions in other independent government agencies (the same administrative category as the Fed). However, even if the forced cessations were estimated as valid, The American legal doctrine has Fed as an agency with special characteristics and, therefore, its even more armored members. Therefore, the political-legal cost of a Powell exit is high and, of course, would also have a tremendously negative impact on the markets, generating even more distrust and eroding the political capital of the current administration.
In relation to the position of Waller and Bowman it should be said that confusion has consequences, because both would not only be competing for the main position, but also weaken the position of the Fed by fracturing their unit, which would include market confidence in the coming months. Besides, This double dissent would generate speculation about the possibility that Powell will continue in the sights. Analysts consider assuming to leave the position in May 2026as planned, it is very likely that the markets incorporate into prices a strong decrease in rates in June next year, which would distort the pricing for companies, which depend on bond markets as a reference.
Source: Ambito
