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Dr. Muhammad Adel Al-Ajmi
Dr. Muhammad Adel Al-Ajmi
Trump and Powell's Conflict
Sunday 10/November/2024 - 07:54 PM
Only two days after Trump's victory in the presidency was announced, tension began between Federal Reserve Chairman Jerome Powell and US President-elect Donald Trump, after Powell hinted at dissatisfaction with Trump's previous interference in the US central bank's policy.
This scene brings to mind the years of conflict between Trump and Powell, as Trump often threatened to dismiss Powell from his position, and after Trump's return, tension is likely to return again, casting a shadow over the global economy.
The Federal Reserve (US Central Bank) announced on Thursday that it had reduced the main interest rate by a quarter of a percentage point to between 4.50 percent and 4.75 percent. This is due to the improvement in labor market conditions.
Powell said in a stern tone that he was not prepared to back down, sending a strong message to Trump: "Challenge me if you can." He stressed that he will not resign from his position if Trump asks him to, and he also explained that he will not be able to dismiss him because his position is protected by law. Although Trump appointed Powell to his current position as head of the central bank in 2017, Powell does not report directly to him, nor to President Joe Biden, who renewed his term for a second term that ends in May 2026.
So, until May 2026, we will witness tensions between the US central bank and Trump, and previous attempts to dismiss him by Trump failed, as the law stipulates the possibility of dismissing the head of the reserve, but for a good reason, and a precise definition of this reason has not been determined, but political differences with the president are not a good reason, otherwise it would have been used during Trump's previous term.
Trump threatened to dismiss Powell several times during his first term in office, and in March 2020, after the markets declined with the start of the Corona pandemic, Trump told reporters that he "has the right to dismiss (Powell)," adding that the latter had made "bad decisions" in his opinion.
Trump insists that the president should have a say in interest rate decisions. He said explicitly in August: “I feel that the president should have a say in this. I think I have a better sense than a lot of people at the Federal Reserve,” and these statements were met with harsh criticism.
This tension puts the independence of the US central bank at stake, and sends a negative message to global markets, which may lead to more instability, in light of complex political and economic conditions, geopolitical tensions, the continued Israeli aggression on Gaza, and the Russian-Ukrainian war. This makes the global scene suffer from more uncertainty in the coming period.
Weekly Facts Disclosure Magazine Editor-in-Chief Jaafar Al-Khabouri