Trump Denies Mnuchin Advised Against Dismissing Powell
Recently, President Trump strongly responded on social media to reports that "the Treasury Secretary advised him against firing Federal Reserve Chairman Powell," calling them "completely untrue." The report, initially published by The Wall Street Journal, claimed that Treasury Secretary Mnuchin had expressed concerns to Trump about the negative consequences of removing Powell. However, Trump denied this, emphasizing his own clear judgment in economic matters.
In a post on the Truth Social platform, Trump stated, "I don't need anyone to explain how the markets work to me," and accused the report of being "typically false," attempting to mislead public perception.
Federal Reserve's Independence Back in Political Spotlight
The focus has again shifted to the independence of the Federal Reserve. Although Trump has repeatedly criticized Powell in the past for being "slow to act" on interest rates, the actual removal of a Federal Reserve Chairman still in office would be unprecedented in American history.
Currently, Powell's term is set to end next spring. The Wall Street Journal, citing sources, indicated that Mnuchin was concerned that dismissing Powell before his term ended would result in legal challenges, potentially reaching the Supreme Court. This potential legal risk has been publicly denied by Trump's team but has not completely allayed market concerns.
Refurbishment Budget Becomes New Battleground, Officials' Remarks Intensify
The $2.5 billion renovation project for the Federal Reserve headquarters has also become one of the flashpoints. The White House Office of Management and Budget Director Vought recently publicly questioned Powell's ability to manage project costs, accusing him of "mismanagement." His inquiries involve crucial issues like budget formulation, approval processes, and expenditure transparency.
Powell responded by stating that the Federal Reserve is committed to "transparent decision-making" and "accountable to the public," but there has been no further statement regarding the renovation expenditures so far.
Trump Targets The Wall Street Journal Again, Launches New Lawsuit
This dispute is not an isolated event but part of the ongoing tension between Trump and the media. Just days before denying the Mnuchin advisory rumors, Trump filed a lawsuit against News Corp founder Murdoch demanding $10 billion in damages, stemming from an article published by The Wall Street Journal about "lewd letters" involving Trump and the late billionaire Epstein.
Also named as defendants are News Corp's current CEO Thomson, The Wall Street Journal's parent company Dow Jones, and the two reporters involved in the article. Trump's team claims such reports are "deliberate defamation," intending to damage his political reputation.
Policy and Personnel Turmoil May Continue to Affect Market Confidence
Even though the Powell dismissal controversy has not reached legal proceedings, frequent news about the Federal Reserve Chair's position and internal disagreements within the government have begun to influence investor sentiment. Some market analysts suggest that if Powell were removed, the Federal Reserve's monetary policy might face "decentralization" risks, weakening its role in controlling inflation and stabilizing markets.
This comes at a crucial time for the Federal Reserve as it considers whether to cut interest rates. If Powell were replaced early, the successor's credibility on policy independence could be challenged, potentially leading to increased volatility in financial markets.
