President Trump has a right as much as anyone else to criticize the Federal Reserve Chairman, Jerome Powell. After all, executives of independent agencies such as the Federal Reserve, the Securities and Exchange Commission, the Federal Trade Commission, and others can't be expected to please everyone with every decision they make. But these agency executives are supposed to be protected from political will; that once one's appointment to an executive position is finalized, he or she is expected to have the freedom to make decisions that are in the best interest of the country, even if the one doing the appointing disagrees with those decisions.
On that note, the United States enjoys benefits from having an independent central bank, such as lower interest rates than what we'd otherwise have, our Dollar is the currency of the world, and we have ample buyers of our Treasury debt. It is globally accepted that our business cycles will ebb and flow, but will never cease, making the U.S. the most stable place in the world for capital and investment. Our standard of living depends on these benefits and we mustn't take these for granted.
So, why would it be a bad thing if President Trump fires Chairman Powell and installs his own "cheap money guy" to help keep the economy growing at, let's say, 4%? It would keep unemployment low and what could possibly be wrong with that?
Because it would create a dangerous precedent. If the ruling political party was able to exert control over the Chairperson of the Federal Reserve, every election cycle would inflate economic bubbles more as politicians would be incentivized to promise economic gains at greater costs, without any counter balance. It would create an environment of inefficient growth, an unbearable debt burden (we could make the case we already have that), and a bubble burst so big that it would damage our economy beyond anyone's ability to fix it. I mean, could you imagine a politician campaigning on a promise to prevent an asset bubble from becoming larger by raising interest rates to lower inflation and risking a recession in the process? I can't either.
Jerome Powell has a long way to go until his legacy is established. But right now it looks like he's trying like hell to avoid being associated with a massive, popping asset bubble. He also appears to be wanting to "reload" the FED's ammunition by raising rates and by scaling down the FED's balance sheet while the economy is strong enough to handle it, so that just in case the U.S. economy slips into a recession, the FED will have the ammo to rescue it. It's a long term plan that will require time and patience to judge its outcome.
Then again, if I was President, I'd want my legacy to include presiding over a strong economy. Why push the economy into a recession just to rescue it? I don't think Powell is trying to do that, by the way; more like he believes he will help sustain and moderate the economy. Therein lies the conflict of interests; one man wants more, one man wants less. In a way, it's Shakespearean; boiled down to simple, opposing human desires.
It's also human to disagree whether or not one's criticism of anyone has gone too far or not far enough. President Trump amped up his criticism of Chairman Powell for raising short term interest rates too aggressively. Powell said he won't be influenced by any criticism. Will this back and forth escalate until Trump either tries to fire Powell or will it make Powell push up interest rates more than necessary in order to show that the FED is independent from political forces? I actually don't think Powell would do that and Trump said he wouldn't fire Powell, which is a positive development in their cross-purposes relationship.
This leads us to the key question of this post:
Could President Trump fire Chairman Powell?
Greg Robb of MarketWatch succinctly answers this in his article from yesterday, October 11
Similar to other independent regulatory agencies, like the Securities and Exchange Commission, the Federal Reserve Act, section 10.2, stipulates that a president can remove a Federal Reserve governor "for cause" rather than "at will."
This is commonly understood as a severe, egregious or criminal act, "not a disagreement with the monetary policy they are pursuing"
The law goes back to the 1940s when President Franklin Roosevelt removed a member of the Federal Trade Commission and cited as a reason their divergent views of public policy. The Supreme Court unanimously reversed the firing, saying executives of independent agencies cannot be removed in their term of office except for cause. These agencies "must be free from executive control," the court ruled.
Back to Mitch --> The answer is no, unless the Supreme Court overturns this precedent, which makes the answer more complicated. Or, President Trump or whomever is the next President, could appoint a new FED Chairperson at the end of Chairman Powell's four-year term, which ends in another 3 years and 3 months.