President Donald Trump sent the stock market into a tizzy on Wednesday after making comments about possibly firing Jerome Powell, the head of the Federal Reserve.
Trump reportedly said he was “closer” to firing Powell during a private meeting with members of the Freedom Caucus, who are among the most conservative Republicans in Congress.
Word got out about his comments by Wednesday morning, and the stock market abruptly dived .5% in early trading, while the S&P’s modest gain turned quickly into a .7% downturn.
Later on Wednesday, Trump walked back the comments and said he was “highly unlikely” to fire Powell, and had only discussed the concept of firing him in the meeting.
All in favor
After Trump backed off from firing Powell, the markets bounced back to showing only .1% losses late in the trading day.
While Trump seemed to backtrack on the idea of firing Powell, he did defend his earlier sentiments.
“Almost every one of them said I should [fire Powell]”, Trump said about the lawmakers present for the private meeting, which was about cryptocurrency policies.
In addition, he intimated that Powell could be forced from his position due to “fraud,” referencing a current investigation into whether Powell mismanaged a $2.5 billion renovation of the Federal Reserve building.
“He’s got some problems”
“He spent far more money than he was supposed to on rebuilding,” Trump said of Powell. “I didn’t see him as being the kind of guy that would want to have parks, rooftop parks, and everything else on top of buildings.”
“But who wants to spend that money for the Fed?” Trump continued. “The Fed is supposed to sit there and say where interest rates are going, and a couple of other very easy things to do. And he spent two and a half billion dollars. I think he’s, you know, I think he’s got some problems.”
Trump’s real problem with Powell is that he has refused to lower interest rates from decade-plus highs, even now that inflation is coming down, and the job market is softening in some ways.
The president has nicknamed his nemesis “Too Late” Powell because the Fed is probably going to start lowering rates in September, or at least the so-called experts think he might.
“He should have cut interest rates a long time ago,” Trump fumed.
Trump is correct that cutting interest rates would probably lead to some short-term economic benefits, but Powell seems to be looking at the longer term, when inflation could become a problem if interest rates are cut when they don’t need to be.
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Author: Jen Krausz
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