A startling rumor emerged on Friday suggesting that Jerome Powell may resign from his position, causing widespread interest and speculation. This was given more gravity when the head of the U.S. Federal Housing Finance Agency (FHFA) expressed, through an official statement, that he would be delighted if the resignation news were true. As speculation grows, the White House has now issued its first statement regarding Powell’s potential resignation. Will Powell indeed step down?
Is Powell Really Resigning?
Although any successor might cast doubt on the Federal Reserve’s independence, the prospective monetary policy directions post-Powell are somewhat anticipated. For months, Donald Trump has publicly and repeatedly suggested that Powell should step aside, calling for interest rate cuts nearly every week and even labeling Powell as “a fool.”
With the resignation rumor gaining traction on Friday and a serious acknowledgment from the FHFA’s official discourse, investors are beginning to consider that “this time it might be true.”
White House Economic Advisor Kevin Hassett, a key figure on such matters, provided insights in a recent interview:
“Trump has the authority to remove Powell if there is justified cause.
Trump reviewed proposed trade agreements and believes they need to be more favorable, warning that tariffs will be applied if the offers don’t meet standards. Trump’s dissatisfaction with Brazil’s actions and trade negotiations includes viewing them as a potential threat to national security, enabling him to impose tariffs under IEPA.
The 50% tariff on copper imports aims to encourage American production. The Fed has a lot to respond to.”
As highlighted, Trump’s emphasis on removal powers confirms that Powell has not resigned yet. Trump’s strategy seems linked to past failures like September’s failed tariff reductions, potentially using resignation rumors to pressure Powell into stepping down, allowing public speculation and even potentially spreading these rumors through his team.
This is due to various reasons:
- Trump’s removal of Powell could politicize the Fed, which markets might not favor.
- Any removal attempt might escalate to higher courts, likely resulting in a reversal.
- Powell resigning voluntarily with less than 10 months left in his term could create fewer economic disruptions.
Despite the rumors, it’s evident Powell is being pressured to resign. However, how long he can withstand remains to be seen.
