WASHINGTON — President Donald Trump said Saturday that he had the power to remove or demote Jerome Powell, the Federal Reserve chair, renewing a long-running threat against the central bank’s leader at a time when it could further roil volatile markets.
Trump said in a news conference at the White House that ousting Powell was not his current plan but that he was “not happy with the Fed” because it was “following” and “we should be leading.” He said he had the right to remove Powell as chair “and put him in a regular position and put somebody else in charge,” but added, “I haven’t made any decisions on that.”
While it was a familiar threat from a president who has continually beaten up on Powell, it was made in the midst of growing concern that the spread of the coronavirus could tip the United States into a recession.
The mere hint that Trump could fire Powell or demote him to a Fed governor risks further destabilizing markets by worrying investors, who are already fretting over the economic fallout from shutdown businesses, quarantined workers and curtailed activity.
Investors have been looking to the Fed to help contain the economic fallout, and Powell led his colleagues in slashing interest rates by half a percentage point in one of the earliest global central bank responses to the coronavirus. The Fed has also been active in soothing disorderly markets over the past week.
“If he removed Jerome Powell, it would be hugely destabilizing to markets,” said Ernie Tedeschi, a policy economist at Evercore ISI in Washington. “The market trusts Jerome Powell to do what monetary policy can do. Jerome Powell gets it.”
As coronavirus cases mount globally — upending supply chains, canceling travel plans, emptying restaurants and closing offices — analysts are penciling in an increasingly severe economic impact. Some now expect the United States to fall into a recession this year.
That has caused a dramatic sell-off in stocks and wild moves across corporate and government bond markets. The Fed has been intervening to keep the financial system functioning smoothly.
The central bank’s policy-setting committee meets this week in Washington, and it is widely expected to cut interest rates — perhaps to near zero — at or before that gathering. It could also renew bond buying or roll out other emergency programs meant to stabilize the inner workings of financial markets, economists expect.
Trump probably does not have the legal authority to fire Powell, whom he nominated in 2017 but who was confirmed by Congress. It is less clear whether the president could demote him, but if he tried, the Federal Open Market Committee — which sets interest rates — could still select Powell as its leader, rendering any new chair mostly irrelevant.
This is not the first time Trump has aired the idea of removing his hand-selected Fed chair. In December 2018, after the Fed raised rates, the president privately talked about firing Powell, telling advisers that the Fed chair would “turn me into Hoover,” a reference to the Great Depression-era president Herbert Hoover. The statements caused jitters on Wall Street.
Mick Mulvaney, who had recently been named the acting White House chief of staff, said in a subsequent television interview that Trump “now realizes he does not have the authority to fire” the Fed chair.
This time around, Tedeschi said he doubted the president would try to demote Powell and was probably just trying to jawbone the central bank before its meeting this week.
“I think people are used to it at this point,” he said. “But it probably doesn’t help.”