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lite.cnn.com - on gopher - inofficial
ARTICLE VIEW:
Trump just took extraordinary action against the Fed. He may not go all
the way
Analysis by Bryan Mena, CNN
Updated:
12:34 PM EDT, Tue August 26, 2025
Source: CNN
President Donald Trump late Monday fired a top Federal Reserve
official, , citing . But for all his recent attacks on the Fed, Trump
is unlikely to take what would be the nuclear option against the
central bank — firing Chair Jerome Powell, whom Trump has slammed for
not yet cutting interest rates this year.
Such a move would likely tank financial markets and deal a serious blow
to the Fed’s independence from politics, which has helped it
successfully fight periods of high inflation and high unemployment in
past decades.
The fact Trump has fired Cook instead of Powell shows the president
recognizes there are severe economic consequences to sacking the Fed
chief – but it doesn’t mean Trump is completely backing off.
No US president has ever fired a Fed governor in the central bank’s
111-year history. But it’s true to form for a presidential
administration that has not hesitated to push limits — up to a point.
Since the beginning of his second term in January, Trump has
relentlessly attacked Powell for not lowering interest rates, lobbing
personal insults like “moron” and “knucklehead” and threatening
to fire him on several occasions.
But Trump eventually backed off from his threats to sack Powell after
his advisers warned him of the sheer chaos in financial markets that
could ensue if he were to do so.
Even the CEOs of big banks, such as JPMorgan’s Jamie Dimon and
Goldman Sachs’ David Solomon, stressed why the Fed’s independence
is so crucial during Trump’s unrelenting attacks against Powell.
Firing the Fed chief would unsettle the entire financial world.
Compare that to Trump’s approach on tariffs, which investors have
dubbed TACO, or “Trump always chickens out.”
In April, Trump unveiled sweeping tariffs on all US trading partners
that most economists said would likely re-ignite inflation and cause
economic growth to stagnate — the double whammy known as stagflation.
The so-called “Liberation Day” tariffs spooked investors, with
stocks taking a nose dive.
Trump eventually reversed course after the bond market started melting
down, Falling bond prices means higher yields — as in, the United
States would have had to pay investors more to loan the country money.
That could have all kinds of negative consequences, including squeezing
US government budgets.
Powell’s firing would be the equivalent of his massive tariffs from
April. And while Trump may have an aggressive, unconventional approach
to his presidency, he’s shown no desire to destroy the US economy.
Cook’s firing could still weigh on financial markets.
“Perhaps the more relevant outcome of a successful removal of Cook is
that other governors could potentially be exposed to removal as well…
this would add to upside inflation risks,” according to a JP Morgan
note on Monday night, just hours after Cook’s removal.
But Powell’s firing would likely cause far greater reaction and could
be a fatal blow to the Fed’s independence. Investors care about that
independence because it means policy makers can set interest rates and
take other steps based on what they see in economic data – not in
political polls.
Economists on Monday night warned about the dangers of going any
further down the road of a political takeover of the Fed.
“This is an attack on the institution,” said Just Wolfers, a
University of Michigan economics professor.
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