US PRESIDENT Donald J. Trump’s continued attacks on US Federal Reserve Chair Jerome H. Powell pose a threat to global central banks’ independence, the Bangko Sentral ng Pilipinas (BSP) chief said.
BSP Governor Eli M. Remolona, Jr. said he shared the concerns expressed by top central bankers at the Fed’s annual Jackson Hole symposium last week about how the Mr. Trump’s attacks on the US central bank could spill over and set a dangerous precedent for the rest of the world.
“(It’s a) very significant threat,” Mr. Remolona told reporters on the sidelines of an event on Tuesday.
“The reason he’s (Mr. Powell) staying is not so much about monetary policy. It’s more about protecting the independence of the Fed, which protects the independence of our other central banks,” he added.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said Mr. Trump’s attempts to undermine the Fed are also affecting market sentiment.
“The independence of the Fed is an important concern for the markets, with Fed Governor [Lisa] Cook looking to challenge Trump’s decision to fire her. Even US Treasury Secretary [Scott] Bessent signaled respect for the Fed’s autonomy especially on rate decisions,” Mr. Ricafort said in a Viber message when sought for comment.
“A few months ago, there was market volatility when Trump said he would like to fire Fed Chair Powell. The markets only stabilized when Trump retracted… But Trump is looking for any wrongdoing as basis for firing Fed officials. Strong institutions of law and rule of law are important for the markets,” he added.
Mr. Trump has repeatedly berated Mr. Powell over not lowering interest rates, though he has halted threats to fire him from a term that ends in a little under nine months anyway, Reuters reported.
His focus last week turned to Ms. Cook, whose departure would allow Trump to select his fourth pick to the Fed’s seven-member board, including Governor Christopher Waller and Vice Chair for Supervision named in his first term, and the pending nomination of Council of Economic Advisers chief Stephen Miran to a currently open seat.
Mr. Trump on Monday said he was firing Ms. Cook over alleged improprieties in obtaining mortgage loans, an unprecedented step that could test the boundaries of presidential power over the independent monetary policy body should it be challenged in court.
Mr. Trump said in a letter to Ms. Cook, the first African-American woman to serve on the Federal Reserve’s governing body, that he had “sufficient cause to remove you from your position” because in 2021, Ms. Cook indicated on documents for separate mortgage loans on properties in Michigan and Georgia that both were a primary residence where she intended to live.
Ms. Cook responded several hours later in a statement e-mailed to reporters through the law office of lawyer Abbe Lowell, saying of Mr. Trump that “no causes exist under the law, and he has no authority” to remove her from the job she was appointed to by former US President Joseph R. Biden in 2022. “I will continue to carry out my duties to help the American economy.”
Though the terms of Fed governors are structured so they outlast the term of a given president, with Ms. Cook’s term lasting until 2038, the Federal Reserve Act does allow removal of a sitting governor “for cause.”
That has never been tested by presidents who, particularly since the 1970s, largely have taken a hands-off approach to Fed matters as a way to ensure confidence in US monetary policy.
It is unclear how the matter might play out from here, with Mr. Trump saying the firing was “effective immediately,” and the Fed set to hold a policy meeting on Sept. 16-17. — Katherine K. Chan with Reuters
