Will the Supreme Court allow Trump to fire Fed Chair Jerome Powell?
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Good morning. It's Tuesday, April 22nd. I'm Shamita Basu. This is Apple News Today. On today's show, why some immigrants are considering self-deportation, Google might have to break up its businesses, and on Earth Day, a look at how clean energy is winning. But first, President Trump is suggesting he wants to remove Fed Chair Jerome Powell. Here he is talking with reporters last week.
If I want him out, he'll be out of there real fast, believe me.
Trump has called Powell a major loser and has said that Powell's termination cannot come fast enough. The thing is, the Federal Reserve is one of a few government agencies designed to be entirely independent. The idea is that it allows them to do their work untouched by political pressures. But that could soon change.
The Supreme Court is addressing a question about whether the president can fire members of independent agencies for anything other than cause.
That's The Wall Street Journal's chief economics commentator, Greg Ip.
If they do, then in theory, the president would be able to fire the chairman of the Federal Reserve. And the Fed chairman would effectively, instead of being an independent central banker, become an at-will employee of the president, like any cabinet secretary.
The case before the court is called Trump v. Wilcox. It's being heard as part of what's known as the shadow docket, meaning there are no oral arguments and little public visibility into what each side is arguing or how the justices are thinking about the issue. Now, for some backstory here, Powell was appointed by Trump during his first term. He was then reappointed by President Biden. His term doesn't run out until next May, and he's repeatedly said he has no plans to resign before 2026. But he and Trump have bumped heads. Powell has been critical of Trump's tariffs, saying they will likely cause both higher prices and slower economic growth. Trump is upset that Powell hasn't cut interest rates.
The Fed's role is to keep inflation low and employment levels high, not to keep politicians or even presidents happy. If the court overturns the legal precedent that keeps the Fed politically independent and makes it so that a Fed chair can be fired by the president, Ip says that could potentially affect how the chair sets policy.
They may decide to keep interest rates lower than they think is wise, and that might result in higher inflation and a lower dollar. Investors know this, and so they will be looking at everything the president says, and they will assume that when the president says, I want lower interest rates or I want a lower dollar, for example, that the Fed will somehow deliver the policy that does that.
And historically, this has happened before with disastrous consequences. Ahead of Richard Nixon's re-election in 1972, he pressured the Fed chair to keep interest rates low. What followed was a decade of economic damage that stemmed from high inflation. Ip says if we see a repeat of that kind of political pressure, it'll come with several risks.
One is that it could introduce a lot of volatility. Now, you might initially get a rally in stocks because stock investors tend to like lower interest rates. But you would also see the markets beginning to build in higher expectations of inflation in the long run. And that could lead to higher long-term interest rates. And that would affect things like the money that the government pays to service the national debt. It would affect things like mortgage rates that homeowners pay.
Keeping the Fed independent is just a part of what's at stake here. This case before the court involves two federal officials, one from the National Labor Relations Board and one from MSPB, the Merit Systems Protection Board, who were fired by Trump. Both are Democrats and both are suing, saying they were wrongfully terminated and can only be fired for cause. In fact, MSPB is the agency that's supposed to protect civil servants from politically motivated firings. So if the court rules to expand presidential powers here, we could possibly see Trump start to unravel protections for civil service workers as well. Let's turn now to immigration and the continued aggressive policies of the Trump administration and their impacts. At the U.S.
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