The American President Donald Trump might hurt the feelings of the investors if he removes Jerome Powell as the chairman of the Fed Reserve, said a former Central Bank governor.
Investors in recent months have been highly nervous due to the rise in tensions between the US and China. The conflict between the two countries has have threatened to derail economic growth even further at a time when the global economy has shown signs of slowing down.
“To fire a Federal Reserve governor or chairman would be a very unprecedented move, it would result in turmoil in the financial markets, it would be something that you really don’t want to do because you don’t need an absolute increase in uncertainty which this would bring about,” Robert Heller, a member of the Fed’s Board of Governors from 1986 to 1989, told CNBC’s“Street Signs” on Thursday.
Heller’s comment came out as Bloomberg, making people aware of the matter, reported on Wednesday that Trump said he believes that he holds the power to demote Powell.
“The law is clear that I have a four-year term,” the central bank chief emphasized.
The Fed on Wednesday announced its decision of the rates being unchanged. But Powell said that some of the officials believe that it has strengthened for the central bank to ease policy — a statement that many investors interpreted as an indication of a rate cut in July.
“I think it’s all but locked in, probably a 95% chance that they do cut at the July meeting,” David Lafferty, chief market strategist at Natixis Investment Managers said.
Although, some experts like Dennis Lockhart, former president of the Federal Reserve Bank of Atlanta, said that it is not a foregone conclusion that the rates will cut in the next month.
He explained that while economic data in the U.S. has been “somewhat mixed,” there aren’t many data releases between now and the next Fed meeting on July 30-31 that would allow central bankers to set monetary policy differently than they did this month.
Still, Lockhart said that the Fed will be mindful of how sentiment is swayed by any trade developments as that has an impact on investment decisions of businesses and inflation — two indicators that the central bank watches closely.