Trump Hints At Demoting Jay Powell To ‘Regular Position’, Says He Took Virus Test

“I’m not happy with the Fed because I think they’re following not leading, and we should be leading”, Donald Trump said Saturday, during a coronavirus briefing that found the president donning a dark blue variant of his signature “USA” trucker hat series.

“I have the right to remove him. No, I’m not doing that”, the president went on to remark.

Then, he appeared to hint at a demotion for Powell. “I also have the right to put him in a regular position and put someone else in charge, and I haven’t made any decisions on that”.

Trump has repeatedly criticized Powell over the course of the coronavirus panic, effectively using the pandemic as yet another excuse to lambast a Fed chair who has labored under near constant public derision from the White House since July of 2018, when the president first lambasted the Powell Fed during an interview with CNBC’s Joe Kernen.

The Fed has, of course, taken action over the past several weeks, delivering an emergency 50bps rate cut (the first inter-meeting cut since the crisis), upsizing existing repo operations, adding new super-sized liquidity facilities and expanding asset purchases beyond T-Bills, with buying now taking place across the curve.

But it will never be enough for Trump. I’ve (only half-jokingly) suggested that Trump should reinstall Janet Yellen, a move which might sound absurd, but which would give markets back their Linus-style security blanket. He could also simply install a more dovish Chair, but at this point, everyone’s a dove. Nobody on the Fed board is arguing for rate hikes or tightening policy ahead of what is an almost guaranteed US recession.

Next week, the Fed will likely deliver a massive rate cut and may well top up monthly asset purchases.

On Friday, the Norges bank cut rates, the BOC delivered another 50bps rate cut in an emergency move, the PBOC slashed RRR, the Riksbank introduced new liquidity measures, the RBA injected cash and the BoJ pledged to keep the spigots open. The ECB kept rates on hold this week, but enhanced its own liquidity tools and upsized QE. All of that is on top of cuts this month from the RBA, the Fed and the BOE.

This is by no means an exhaustive treatment, but it gives you the “flavor”, so to speak:

I suppose it’s possible to accuse the Fed of being a “follower” and not a “leader”, but the distinction is meaningless at this juncture – at least from the perspective Trump is thinking about it.

There is, in fact, a dollar-funding crunch and the Treasury market is malfunctioning, but the Fed tried to address that this week (see above). After next week’s virtually guaranteed package of measures (which may well include something on swap lines), the Fed will have done almost everything it can do – literally.

It’s possible to argue – as Zoltan Pozsar has – that the Fed needs to do more in terms of recognizing its role as the only USD “surplus” agent in a global economy where deficit agents are set to proliferate over the coming months, but that’s a different discussion.

On Tuesday, after a grievous plunge in US equities, Trump called Powell “pathetic“. Note in the chart that the line for the Fed obscures the BOC’s Friday cut):

Also on Saturday, Mike Pence extended the travel restrictions announced by Trump on Wednesday to the UK and Ireland.

Oh, and Trump has taken the test. “I also took the test last night”, the president said. “Based on the press conference yesterday I thought I should”.

He’ll let you know the results “in a day or two days or whatever it is”.