As chair of the US Federal Reserve, Jerome Powell is one of the world’s most important and consequential economic figures. He is also, according to Donald Trump, the man who gave him the job, “a major loser”.
The puerile president wrote on social media: “There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.”
In recent days, such has been the ferocity of Trump’s personal attacks on Powell over his handling of the US economy that, on Monday, the value of the dollar sank to its lowest point in three years. Stocks, already bruised by the “Trump Slump” from global tariffs, have taken a further hit.
The central bank boss is in Trump’s crosshairs because the Federal Open Market Committee (FOMC), the equivalent of Britain’s rate-setting Monetary Policy Committee (MPC), has been sitting on its hands at a time when the American economy is grappling with turbulence created by… well, guess who?
Trump seems to believe that the Fed’s decision to hold rates at between 4.25 and 4.5 per cent since the start of the year is part of a plot to undermine his presidency. He has accused the Fed chief of playing politics, claiming the series of cuts he made in the autumn were designed to boost the electoral chances of “sleepy Joe Biden and Kamala [Harris]”.
For the record, the Fed’s initial interest rate cut of half a percentage point, which is the sort of big move the MPC has shied away from, came on 18 September. It was followed by a quarter-point cut on 7 November, with the final action coming on 18 December. So, after Trump’s election, then.
Is Trump now Powell’s boss? It’s true that the president nominates the Fed chair, with the appointment subject to confirmation from the US Senate. But Trump has no direct control over who heads up the FOMC, and it isn’t altogether clear whether he or she can then be removed from that appointment – although it is something that Trump has said he is exploring.
So, hold on to your stock markets. Trump’s assault on the Fed could yet prove to be of lasting significance, and the markets’ negative response to presidential pressure are but a taster for what could happen if he makes a serious attempt to remove him and install a more pliable replacement – someone willing to bend the knee and indulge him, despite his limited understanding of global economics.
But here’s where it gets really interesting, and potentially more dangerous still. Would Powell’s fellow governors and FOMC members step down en masse in support of him if Trump does find a way to deploy the catchphrase he made famous in the US version of The Apprentice?
Those who’ve been watching this will be only too well aware of the potential chaos that could be unleashed were that to happen. The need for calm may ultimately prevent them from taking such a step. On the other hand, they might just consider it to be the only option in the face of a president whose bull-in-a-china-shop behaviour is smashing far more than just plates.
Note that the price of gold – traditionally the safe haven of investors when markets are in a state of panic – has continued to hit new records. Partly, that comes as a result of the weakness of the dollar, in which it is priced. But I don’t think its relentless rise is over as investors desperately seek a place to hide.
