Will Trump Fire FED Chairman Jerome Powell? What Happens to the Markets If He Does? An Economics Professor Commented!

Despite the recent threats from U.S. President Donald Trump that he could dismiss FED Chairman Jerome Powell, economists and lawmakers agree that such a move is unlikely.

However, the political pressure stemming from Trump's remarks may affect the FED's decision-making process.

Francesco Bianchi, an economics professor at Johns Hopkins University, stated in a statement to reporters that although Trump's threats are not expected to be fulfilled, the rhetoric surrounding the issue could affect public perception and, consequently, the actions of the central bank. Bianchi noted that Trump's public calls for interest rate cuts could increase pressure on policymakers, saying, "The FED knows it will be blamed if there is a recession."

The discussion erupted after Powell indicated last week that there was no urgent need to lower interest rates, leading to a strong warning from Trump that he could dismiss the Fed chairman. These comments triggered a sharp decline in the stock market as investors expressed concern about the independence of the Fed being at risk.

According to Bianchi, Trump's likelihood of actually removing Powell is low. "Powell's term will end in about a year," he explained, adding: "Firing him would create significant market turmoil that outweighs short-term political gains. The markets will likely interpret this as a sign of future interest rate hikes rather than rate cuts."

Amid growing controversies, key lawmakers rejected Trump’s words. Republican Senator John Kennedy from Louisiana and a member of the Senate Banking Committee did not accept the President's claim of authority over the central bank chairman.

In an interview with NBC, Kennedy said, "I don’t think the President, any president, has the authority to remove the FED chairman," and added, "The FED should remain independent."

Speaking from the Oval Office last Thursday, Trump reiterated his claim, saying, "If I had wanted him to be removed from office, believe me, he would have been removed very quickly." However, Kennedy continued to support Powell's approach to monetary policy, especially the president's focus on controlling inflation.