US President Donald Trump said on Monday he has no plans to remove Federal Reserve Chairman Jerome Powell, although he renewed his harsh criticism of him and refused to completely rule out the possibility of his removal, Reuters reported.
A Bloomberg report earlier today that Trump is likely planning to fire Powell soon sent stocks and the dollar lower, while yields on US Treasury bonds rose.
Trump, who has criticized Powell almost daily for not cutting interest rates, said the report was not accurate, but confirmed that he had raised the idea with Republican lawmakers on Tuesday night.
It represents the latest chapter in his increasingly intense pressure campaign on the independent central bank and its shaken chairman, according to Reuters.
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"I'm not ruling anything out, but I think it's very unlikely, unless he has to go because of fraud," Trump said, alluding to recent criticism from the White House and Republicans over cost overruns on a $2,5 billion renovation project at the Fed's headquarters in Washington.
However, there is no indication that there is any fraud, and the Fed has dismissed these allegations.
After Trump's latest comments, markets pared losses somewhat and bond yields stabilized. Trump also repeated his well-known remark that Puel is a "terrible" president and should have cut interest rates long ago. He also confirmed that he had spoken to some Republican lawmakers about the possibility of firing him.
While Trump tried to downplay the seriousness of the situation, Republican Senator Tom Tillis used his time in the Senate to vigorously defend the independence of the Federal Reserve, which economists believe is key to the stability of the financial system and prices in the US.
"There has been talk of removing the Fed chairman. Putting the Fed under direct control of the White House would be a huge mistake. The consequences of removing the Fed chairman simply because politicians disagree with economic decisions would be to undermine the credibility of the United States. And I argue that in that case there would be an almost immediate market reaction - and we must avoid that," said Tillis, a member of the Senate Banking Committee, which oversees the work of the Federal Reserve and confirms presidential nominations.
Asked whether it would be problematic if Trump removed Powell, Senate Majority Leader John Thune told reporters: "As far as I know, he has no plans to do that."
House Financial Services Committee Chairman French Hill previously told CNBC: "According to President Trump's own analysis and that of his Treasury Secretary, he cannot fire Jay Powell."
Powell, who was nominated by Trump in late 2017 to lead the Fed and then renominated by Democratic President Joseph Biden four years later, has repeatedly stated that he intends to serve a full term that runs until May 15, 2026.
A recent Supreme Court decision solidified a long-standing interpretation of the law that the Fed chairman cannot be removed for disagreements over monetary policy, but only "for good cause."
Last week, the White House appeared to try to set the stage for such a shift when the director of the Office of Budget and Management, Russell Vote, sent Powell a letter stating that Trump was "extremely concerned" about renovations to two Fed buildings.
Powell responded by asking the US central bank's inspector general to examine the project, and the Fed posted a frequently asked questions document on its website, refuting some of Voight's claims, including allegations of luxury dining rooms and elevators that allegedly increase costs.
The Fed's decision to keep its benchmark interest rate in a range of 4,25% to 4,50% while it assesses the effects of Trump's tariffs on inflation has caused growing discontent from Trump.
Treasury Secretary Scott Besant said a "formal process" has been launched to select Puel's successor. Candidates include Besant himself, White House economic adviser Kevin Hassett, former Fed Governor Kevin Warsh and current Governor Christopher Waller.
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