The next day, Powell announced a rate increase and signaled that the Fed would stay the course.

The central bank is designed to act independently, so that it can continue to make the best monetary policy decisions for the sake of the American public, without influence by partisan politics or a single personality in the White House. A governor may be “removed for cause by the President” under the Federal Reserve Act, and the chairman of the Fed is a governor. However, the rules about central bank leadership are opaque, Bloomberg notes, citing legal expert Peter Conti-Brown of the University of Pennsylvania, author of  The Power and Independence of the Federal Reserve (Princeton University Press, 2017).

Trump’s closest advisors are said to be urging the president not to take any action against Powell. The hope is that the president will drop the subject as the holidays arrive. Quartz reached out to the White House but did not receive an immediate reply.

Trump has already broken with Fed-White House tradition. For decades, Fed chairs have seen their four-year terms renewed, even when they were appointed by the president of the opposing party. Last February, Trump did not renew former Fed chair Janet Yellen’s term; Yellen had been appointed by president Obama. Trump instead installed Powell, a lawyer and investment banker.

This is not the first time that Trump has raised questions about Powell’s leadership. In October, Trump commented that he wouldn’t fire Powell, proving that he had been weighing that possibility. That same month, in a complaint about the Fed’s policy of gradually raising interest rates, he said, “I think the Fed has gone crazy.”  He also acknowledged the Fed’s independence in an interview with Fox News in which he said, “My biggest threat is the Fed.”

However, these are the first reports that Trump is actually talking about perhaps firing Powell, and asking for his advisors’ opinions.

In a story published today, Bloomberg gathered investor and analyst views on the risks involved in this hypothetical situation. “[T]raders didn’t rule out a bounce—whether on reflexive disdain for Powell’s policies or simply because of the steepness of last week’s decline,” journalists Vildana Hajric and Elena Popina wrote. But the majority of those interviewed believed the consequences would be dire.

Nick Sargen, chief economist with Fort Washington Investment Advisors, said that the “markets would erupt.” Powell’s removal “would be construed as a loss of the Fed’s independence,” he said, “and the dollar would sell off along with stocks.”

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