US President Donald Trump said on Wednesday that he does not plan to fire Federal Reserve Chair Jerome Powell, but refused to rule it out entirely, escalating a long-running feud with the head of the central bank despite market turbulence and political pushback.

A Bloomberg report earlier Wednesday that the president is likely to fire Powell soon sparked a drop in stocks and the dollar, and a rise in Treasury yields.

Responding to a Bloomberg report earlier in the day suggesting he was close to ousting Powell, Trump called the claim “not true” but confirmed that he had discussed the idea with Republican lawmakers.

“I don’t rule out anything,” Trump told reporters at the White House. “But I think it’s highly unlikely unless he has to leave for fraud.”

The comment was a reference to recent Republican criticism over cost overruns in the $2.5 billion renovation of the Fed’s Washington headquarters. The Federal Reserve has denied any wrongdoing, and there is no evidence of fraud.

“I think he’s a terrible Fed chair,” Trump said of Powell, reiterating his view that Powell should have already cut interest rates. “We’d be in a much better place right now if he had acted sooner.”

Trump acknowledged that he had floated the idea of firing Powell during a Tuesday meeting with GOP lawmakers. The statement further underscored his willingness to exert political pressure on the central bank, despite its legally protected independence.

Republican Senator Thom Tillis used his time on the Senate floor to deliver a spirited defense of an independent Fed, which economists say is the linchpin of US financial and price stability.

“There’s been some talk about potentially firing the Fed chair,” said Tillis, a member of the Senate Banking Committee that oversees the Fed and confirms presidential nominations to its Board. Subjecting the Fed to direct presidential control would be a “huge mistake,” he said.

“The consequences of firing a Fed Chair, just because political people don’t agree with that economic decision, will be to undermine the credibility of the United States going forward, and I would argue if it happens, you are going to see a pretty immediate response, and we’ve got to avoid that,” Tillis said.

Powell, who was nominated by Trump in late 2017 to lead the Fed and then nominated for a second term by Democratic President Joe Biden four years later, has repeatedly said he intends to serve out his term, which runs through May 15, 2026.

– Ends

Inputs from Reuters

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