1. Background of the Incident
- Trump's Relationship with Powell: Powell was nominated by Trump in 2017 to serve as Fed Chairman, but Trump later publicly criticized his interest rate policy multiple times, believing it would drag down economic growth and stock market performance.
- Focus of the Conflict: From 2018 to 2019, the Federal Reserve gradually raised interest rates to curb inflation pressures, which Trump believed undermined the economic benefits of his tax cuts and trade policies, even calling the Fed "crazy."
2. "Firing" Controversy
- Legal Controversy: According to the (Federal Reserve Act), the president cannot arbitrarily fire the Fed Chairman unless there are "legal grounds" (such as misconduct). This legal interpretation is ambiguous, but historically, no president has attempted to fire a Fed Chairman.
- Trump's Threat: Reports indicate that Trump privately discussed the possibility of firing Powell, but the White House legal counsel warned that such an action could lead to a constitutional crisis, and it ultimately did not happen.
3. Reasons Behind Trump's Statement of "No Intent to Fire"
- Market Stability: Rumors of firing Powell raised concerns in the market about the erosion of the Fed's independence, and Trump may have downplayed the conflict to soothe the market.
- Political Reality: Legal barriers and opposition from Congress (including within the Republican Party) made firing difficult, leading Trump to choose compromise.
4. Subsequent Impacts
- Powell's Tenure: Despite tense relations, Powell completed his four-year term (until 2022) and received renomination under the Biden administration.
- Independence of the Central Bank: The incident highlights the importance of the Federal Reserve's independence in American politics, where policy decisions remain driven by economic data even in the face of presidential pressure.
5. Deeper Significance
- Political and Monetary Policy Game: Trump's criticism reflects the tendency of executive power to interfere in central bank decision-making, but institutional design limits such interference.
- Historical Precedents: Similar conflicts are not unprecedented (e.g., Nixon's conflicts with Fed Chairman Burns), but the level of public exposure was particularly notable during Trump's tenure.
Trump's statement was more a pragmatic response to legal and market pressures than a genuine endorsement of Powell's policies. This incident became a typical case illustrating the relationship between American politics and central bank independence, showing the role of institutional checks and balances in maintaining the professionalism of economic policy.
