When Asked About Dismissing the Fed Chair,
Trump Says "I Never Rule Anything Out, but the Likelihood Is Very Low"
Warsh and Hassett Emerge as Two Main Candidates for Next Fed Chair
On July 16 (local time), U.S. President Donald Trump stated that the likelihood of dismissing Jerome Powell, the Chair of the Federal Reserve (Fed), was "very low unless fraud related to the Fed building renovation costs is uncovered." President Trump's comments suggest that while he is not completely ruling out the possibility of removing Powell, he aims to reduce political burden and avoid unnecessarily unsettling the markets.
During a meeting with the Prime Minister of Bahrain at the White House in Washington, D.C. on the same day, President Trump was asked by reporters whether he was considering dismissing Chair Powell. He replied, "I never rule anything out," and added, "However, unless he has to step down because of fraud involving the (Fed building renovation), I think the likelihood (of dismissal) is very low."
When pressed again about whether he had any plans to remove Powell, President Trump responded, "No," and said, "We are not planning anything." This ambiguous stance, which does not completely rule out the possibility of dismissing Powell, is seen as an attempt to avoid giving the markets unnecessary shocks.
The White House and some Republican figures have raised concerns about excessive spending and procedural issues, pointing out that the cost of renovating the Fed headquarters has exceeded the original plan by $700 million, reaching a total of $2.5 to $2.7 billion. In effect, they are using the renovation project as a new means to pressure Chair Powell.
On this day, President Trump also stated, "There is a possibility that fraud was involved in the $2.5 or $2.7 billion renovation costs," and questioned, "How can you spend $2.7 billion just to renovate a building? Powell did not even obtain proper approval during this process."
He further argued that Chair Powell could be subject to dismissal for "for cause." Previously, CBS reported, citing White House sources, that Trump was exploring ways to dismiss Powell based on "for cause," but that the White House had not yet established a legal basis for such action.
The Federal Reserve Act stipulates that the Fed Chair cannot be dismissed without "for cause." Due to this legal restriction, President Trump has repeatedly urged Powell to resign voluntarily, but Chair Powell has consistently stated that he has no intention to step down.
President Trump emphasized that the push to dismiss Chair Powell is not a matter of personal feelings, but is supported within the Republican Party. He said, "I spoke with them (lawmakers) about the idea of dismissing Powell," and added, "I asked, 'What do you think?' and almost everyone said he should be dismissed. But I am more cautious than they are."
On this day, President Trump once again expressed his dissatisfaction with Chair Powell, who has not lowered interest rates despite repeated requests. He called Powell a "terrible Fed Chair" and insisted, "What he needs to do is lower interest rates." These remarks are interpreted as an attempt to pressure for a rate cut ahead of the upcoming Federal Open Market Committee (FOMC) meeting scheduled for July 29-30. The current benchmark interest rate is around 4.3%, and President Trump argues that the Fed should lower it by up to 3 percentage points to reduce the federal government's borrowing costs.
With the possibility of Powell's dismissal being discussed, attention is turning to potential candidates for the next Fed Chair. The race for the next Fed Chair is shaping up as a two-way contest between former Fed Governor Kevin Warsh and White House National Economic Council Director Kevin Hassett.
President Trump said, "There are many people who want the Fed Chair position," and regarding Hassett, who is frequently mentioned in the media as a leading candidate, he commented, "He is one of the people we are considering."
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