President and his team have pressured the Fed to resume cuts, cheapering the cost of credit in the US
SAO PAULO, SP (Folhapress)-The director of the White House National Economic Council, Kevin Hassett, said on Friday (18) that President Donald Trump and his team study the possibility of dismissal of the Fed President (Federal Reserve, Central Bank, Jerome Powell.
“The president and his team will continue to study the subject,” Hassett told reporters when asked if dismissal is an option. “This Federal’s policy book was to increase interest rates at the minute it was elected last time to say that the tax cuts on the side of the offer would be inflationary,” he criticized.
The reference rate of reference is between 4.25% and 4.50% since December, after several cuts late last year. Trump and his team have been pressing to the Fed to resume cuts, cheapering the cost of credit in the US. The BC, however, is aware of inflation, monitoring potential impacts on tariff prices on imports imposed by the current government -economists take the transfer of costs to the end consumer.
This week it increased Powell’s pressure, publicly threatening to fire it. The US President accused the chief of the Fed of “doing politics” for not reducing the interest rate and said he has the power to get him out of office “very quickly.”
In a post on its social network, Truth, that Powell’s departure “couldn’t be taking longer.” He also said that the Fed president “should have reduced the interest rate, such as the ECB [o Banco Central Europeu]for a long time. ”In his view, Powell is“ always late and wrong ”.
The comments occurred after the president of the American BC said at an event in the Wednesday, being BC’s obligation to ensure that “a punctual increase in price level does not turn into a continuous inflationary problem.” He also stated that “Fed independence is widely understood and supported by Washington and Congress, where it really matters.”
According to the current understanding established by the Supreme Court, the president does not have the power to dismiss directors of regulatory agencies ,. “By law, the president cannot dismiss a Fed Director, except ‘for just cause’, a legal term that means he would have to demonstrate that the person has committed some irregularity,” explains David Wessel, director of the Hutchins Fiscal and Monetary Policy Center in an article for the Brookings Institute.
A pending case of decision, however, may open a breach for the resignation of Powell if judges retreated from a precedent established in 1935, when it was determined that the president could not dismiss a director of a regulatory agency.
The Fed board is made up of seven 14 -year -old members, all nominated by the US President. Bank leadership is indicated by the White House and confirmed by a Senate vote every four years. Powell was appointed to a second term by 2022 -then current term ends in May next year. In his first term, he was nominated by Trump.
In addition to the legal issue, members of the Republican team fear the impact that a possible dismissal of Trump can have on the financial market -to turbulence due to the uncertainty around Trump’s tariffs on partners.
Treasury Secretary Scott Bessent has been privately told the White House that any attempt to fire Powell could destabilize the financial market, according to. Trump would be aware of this risk, and republican allies see his pressure on the Fed chief more as a strategy to blame him for economic problems in the future than a real attempt to fire him.
This either is the first time Trump has been shocked with Powell. In his first term, he frustrated with his choice for the Fed after successive high interest rates in 2018.
