WASHINGTON: President Donald Trump said the US should have Mario Draghi, president of the European Central Bank, at the helm of its monetary policy – “instead of our Fed person” – and reiterated that he has the right to demote or fire Federal Reserve Chairman Jerome Powell.
“Nobody ever heard of him before, and now I made him and he wants to show how tough he is,” Trump said Wednesday of Powell, speaking in an interview on Fox Business Network. “OK, let him show how tough he is. He’s not doing a good job.”
Trump has criticised the Fed for making credit more costly last year and for failing to lower interest rates last week. Policy makers “blew it” on June 19 when they kept the benchmark overnight rate unchanged, Trump tweeted on Monday. He compared the Fed to a “stubborn child.” He’s also recently denied that he threatened to demote Powell but says he has the authority to do so.
Trump reiterated those points on Fox Wednesday, saying: “I have the right to demote him. I have the right to fire him,” but Trump “never suggested” he would actually take such an action.
Powell said at his post-meeting press conference last week that “the law is clear that I have a four-year term and I fully intend to serve it.”
Republican Senator John Kennedy said he didn’t know whether Trump could demote Powell. But the Louisiana lawmaker and Senate Banking Committee member said the Fed chairman was doing a “good job” and that the central bank should be free of political interference.
“It is very, very important that Powell and the Fed should be allowed to do their job,” Kennedy said in a Bloomberg Television interview to be aired later on Wednesday. “The Federal Reserve is and should be an independent agency.”
Earlier this month, Trump attacked Draghi in a tweet, after the ECB chief signalled more monetary stimulus may be on the way for the euro area.
Trump tweeted that such a move would make it “unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.”
On Tuesday, at an event at the Council on Foreign Relations in New York, Powell highlighted the importance of the central bank’s autonomy from political interference – even though he didn’t mention Trump by name.
“The Fed is insulated from short-term political pressures – what is often referred to as our independence,” Powell said. “Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests.”
Also on Tuesday, Powell reiterated that downside risks to the US economy have increased recently, reinforcing the case among policy makers for somewhat lower interest rates.
A consensus is building that Powell and his colleagues will cut interest rates in coming months, as trade disputes hurt the outlook for the world economy. Last week, at its policy meeting, the Fed decided to leave rates unchanged but opened the door to a cut.