https://www.cnbc.

com/2019/06/20/trump-could-cause-market-turmoil-if-he-removes-powell-as-fed-
chair.html

F ED E RA L R ES E RVE

Trump could cause market ‘turmoil’ if he

removes Powell as central bank chief, says
former Fed governor
PUBLISHED THU, JUN 2 0 2019 1:35 AM EDTUPDATED T HU, JUN 20 2019 3:18 AM EDT

Yen Nee Lee @ Y E N N E E _ L E E

KEY POINTS
 Investors have in recent months become increasingly nervous as trade tensions between the U.S.
and China rise.

 U.S. President Donald Trump risks making things worse if he removes Jerome Powell as chairman of
the Federal Reserve, said Robert Heller, a member of the Fed’s Board of Governors from 1986 to
1989.

 Powell said some Fed officials believe the case has strengthened for the central bank to ease policy
— a statement that many investors interpreted as an indication of a rate cut in July.
WATCH NOW

VIDEO03:19

Both the market and the Fed are ‘too dovish’: Former Fed governor

U.S. President Donald Trump risks hurting investor sentiment if he

removes Jerome Powell as chair of the Federal Reserve, according to a former
American central bank governor.

Investors have in recent months become increasingly nervous as trade tensions

between the U.S. and Chinarise. Conflict between the two major powers 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 as Bloomberg, citing people familiar with the matter,
reported on Wednesday that Trump said he believes he has the authority to
demote Powell.

The president had publicly blamed the Fed’s interest rates hikes for holding back
U.S. economic growth. He considered demoting Powell in February, Bloomberg
reported on Tuesday. After the Fed announced its monetary policy decision on
Wednesday, Powell said he intends to serve his full four-year term.

“The law is clear that I have a four-year term,” the central bank chief emphasized.

Not a done deal

The Fed on Wednesday announced its decision to keep rates unchanged. But
Powell said some officials believe the case 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,
told CNBC’s“Squawk Box.”
WATCH NOW

VIDEO02:57

A rate cut in July is not a ‘foregone conclusion’: Ex-Fed president

But some experts such as Dennis Lockhart, former president of the Federal
Reserve Bank of Atlanta, said it’s not a “foregone conclusion” that the Fed will
ease policy 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 told CNBC’s “Squawk Box” 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.