Jamie Dimon is sending President Donald Trump a message: Cool it on haranguing with Jerome Powell to cut rates.
On Tuesday, the JPMorgan CEO touched on the feud between Trump and the Fed chair. Dimon said it’s important for the central bank to maintain its independence, referring to Trump’s threats to fire Powell or announce a new Fed chair months in advance, a move that could undermine Powell’s decision-making.
“The president said he’s not going to try to remove Jay Powell,” Dimon said after JPMorgan reported its earnings for the quarter. “The independence of the Fed is absolutely critical, and not just for the current Fed chairman, who I respect, but for the next Fed chairman.”
“Playing around with the Fed can often have adverse consequences, absolutely opposite of what you might be hoping for,” Dimon later added.
Trump’s fight with Powell
Reuters
Trump has made it clear that he isn’t happy with Powell, whom he appointed in 2017. The president has repeatedly put pressure on the Fed chief this year to lower interest rates immediately, calling Powell “Too Late,” a “major loser,” and a “very dumb, hardheaded person” in posts on Truth Social.
Trump also said earlier this year that he was considering removing Powell from his post, before he clarified that he had no intention of firing the Fed chair before the end of his term next year.
But the president and other members of his administration have continued to lob criticism at Powell.
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In June, a Wall Street Journal report said that Trump was considering announcing a new Fed chair as soon as this fall.
Treasury Secretary Scott Bessent — one of the contenders for the next Fed chief, according to the Journal’s report — also floated the idea of a “shadow Fed Chair” in October of last year. The shadow chair would be a Fed Chair announced before the end of Powell’s term, who could indicate to markets what to expect after Powell is gone, Bessent told Barron’s at the time.
National Economic Council Director Kevin Hassett, another reported contender for Fed chair, said on Tuesday that Trump didn’t want to fire Powell, but “certainly” could if there was a cause. Lately, the administration has said that one possible cause for Powell’s removal could be the renovation of the Fed building in Washington, DC.
Russell Vought, who runs the Office of Management and Budget, said Powell’s oversight of the work amounted to mismanagement of the central bank.
Market pros have warned that meddling with the Fed’s independence could have significant consequences on financial markets. That’s because the Fed lowering interest rates prematurely could loosen inflation expectations in the economy and lower the credibility of the Fed, making inflation harder to fight in the future.
If Trump were to move forward with an early announcement of the next Fed chair, bond yields could actually move higher as investors grow more concerned about the inflation outlook, analysts previously told Business Insider.
The next Fed chair also isn’t guaranteed to cut rates when their term begins, as the central bank’s policymaking committee needs to come to a consensus before making changes to the benchmark rate.
