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Trump considers Powell’s removal: open clash over monetary policy

US president attacks Federal Reserve number one for failure to cut rates. But the legal limits are obvious

Donald Trump returns to the attack on Federal Reserve Chairman Jerome Powell, now openly referred to as an obstacle to US economic recovery. It is not just a matter of verbal criticism: according to White House economic advisor Kevin Hassett, ‘new legal analyses’ are being carried out to verify the possibility of removing Powell from his post.

At the centre of the tension is the failure to cut interest rates, a move that Trump considers necessary to support the economy. The US president accuses Powell of ‘playing politics’ and not ‘doing his job’, as he also reiterated during his recent meeting with Italian Prime Minister Giorgia Meloni in the Oval Office. A critical position that Trump has been pursuing for some time, despite the fact that it was he who appointed Powell to lead the Fed in 2018, except that he already started in 2019 to call him ‘an incompetent’.

But can the president really fire the head of the Federal Reserve? The Federal Reserve Act of 1913 provides for the possibility of removal only ‘for cause’, which has so far been interpreted very restrictively: only in the case of serious violations or misconduct, and not for differences on monetary policy choices.

In Powell’s case, there are no allegations of wrongdoing, thus making a legally founded removal very unlikely. And while disagreements between governments and central banks are far from rare – just think of the pressure received by Christine Lagarde at the ECB or the Italian cases of Fazio and Visco – the forced removal of governors remains an extreme hypothesis that is practically never practised.

The tug-of-war between Trump and Powell, therefore, is played out more on the political and communicative level than on the institutional one, at a time when monetary policy remains a crucial junction also for electoral strategies.

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