WASHINGTON — President Trump has unabashedly hitched his political fortunes to a rising stock market. Now, with stock prices in retreat, he has become increasingly fixated on the idea that one man is to blame for the recent rout: Jerome H. Powell, chairman of the Federal Reserve.
After the Fed raised its benchmark interest rate on Wednesday, the fifth consecutive quarterly increase, Mr. Trump fretted to aides that Mr. Powell would “turn me into Hoover,” a reference to the man who was president in the early years of the Great Depression.
Mr. Trump has said choosing Mr. Powell for the Fed job last year was the worst mistake of his presidency and he has asked aides whether he has the power to fire him.
But the volatile stock market, which just posted its worst week since 2008, is falling in part because of Mr. Trump’s own policies, including an escalating trade war with China, a shutdown of the federal government and the fading effects of the $ 1.5 trillion tax cut Mr. Trump ushered in at the end of 2017. While the Fed’s rate increases have upset investors — who seem to have a darker view of economic growth than the central bank does — some analysts said Mr. Trump’s musings about the Fed would only exacerbate anxieties.
“If Powell gets terminated, what we’ve seen happen in the markets in the past few weeks will look like a walk in the park,” David Rosenberg, chief economist at Gluskin Sheff, said in an email Sunday. “The dollar will go into a tailspin, and even confidence in the Treasury market will erode, especially among foreign creditors.”
Mr. Trump’s economic advisers scrambled over the weekend to reassure markets that Mr. Trump was not, in fact, planning to fire Mr. Powell. Treasury Secretary Steven Mnuchin tweeted what he said was a quote from Mr. Trump accepting that he did not even have the power to do so.
“I totally disagree with Fed policy,” Mr. Mnuchin quoted Mr. Trump as saying. “I think the increasing of interest rates and the shrinking of the Fed portfolio is an absolute terrible thing to do at this time, especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so.”
Mick Mulvaney, the incoming acting White House chief of staff, implied on Sunday that Mr. Trump had, in fact, inquired about removing Mr. Powell, saying on ABC’s “This Week” that the president “now realizes he does not have the authority.” But Mr. Mulvaney added that he had heard this from Mr. Mnuchin, not from Mr. Trump.
Mr. Trump has not addressed the issue directly, including on his own Twitter feed, which he has frequently used to criticize the Fed. The White House press secretary, Sarah Sanders, told reporters on Saturday, “I’m aware of no plans to fire Mr. Powell” — but that brief statement stopped well short of corroborating Mr. Mnuchin’s account of the president’s views.
Mr. Mnuchin has worked in recent days to obtain Mr. Trump’s assurance that he would not remove Mr. Powell, according to an administration official who spoke on condition of anonymity. But that person cautioned that Mr. Trump could change his mind. The person noted Mr. Trump has a tendency to nurse grudges even when he temporarily sets a subject aside.
Mr. Mnuchin has been under pressure from Mr. Trump to stabilize markets, which are on pace for the largest December declines since the 1930s. In a statement Sunday, Mr. Mnuchin said he had contacted the chief executives of six major banks to make sure their operations were running smoothly.
Mr. Mnuchin, who made the calls while on vacation in Cabo San Lucas, Mexico, said that bank executives confirmed they had sufficient liquidity for lending and market operations — the kind of statement the government usually reserves for moments of genuine uncertainty about the health of the financial system. The statement added that Mr. Mnuchin would convene a meeting of the President’s Working Group on financial markets, which he leads, to coordinate efforts to “assure normal market operations.”
The Fed’s unanimous decision to raise its benchmark interest rate on Wednesday reflected the confidence of its officials that the economy remains strong — even as they insisted that future rate increases would depend on continued growth. By raising rates, the Fed is bringing to a close its long campaign of economic stimulus that began during the 2008 financial crisis, which included lowering interest rates to near zero.
Still, Mr. Trump is hardly alone in his opposition to the Fed’s move. Some economists argue the Fed should continue its stimulus campaign to drive up employment and wages. They note that the Fed is about to undershoot its 2 percent inflation target for the seventh consecutive year, suggesting there is no need to step on the brakes.
Many investors had also wanted a pause, and the decision set off another slide in stock prices.
But even investors who disagreed with Wednesday’s decision generally do not want politicians to play a larger role in Fed policymaking, preferring to leave the management of interest rates primarily in the hands of technocrats. Most developed nations have granted their central banks considerable autonomy over policymaking precisely because of concerns that politicians would seek to increase short-term growth at the expense of inflation and instability.
In fact, during his presidential campaign, Mr. Trump accused the Fed of getting political, saying that the bank’s chairwoman at the time, Janet L. Yellen, should be “ashamed” for keeping interest rates low — a move he said was meant to help President Barack Obama.
“Markets are in the business of looking forward, and looking forward to a world with greatly diminished central bank independence isn’t something that markets should find comforting,” Eric Winograd, senior United States economist at AllianceBernstein, said in an email.
Senators from both parties also warned the president against firing Mr. Powell. The president’s deliberations on Mr. Powell’s fate were first reported by Bloomberg News.
“I’d be very careful about doing that,” Senator Richard Shelby, an Alabama Republican and a former chairman of the Senate Banking Committee, told reporters on Saturday. “The independence of the Fed is the foundation of our banking system.”
Senator Sherrod Brown of Ohio, the ranking Democrat on the Senate Banking Committee, said, “Given the Fed’s consensus on monetary policy, any effort to remove Powell would hit the trifecta: unlawful, ineffective and damaging to the economy.”
A key question is whether Mr. Trump has the legal authority to remove Mr. Powell. The Federal Reserve Act, which had its 105th anniversary on Sunday, says the president can remove members of the Fed’s board of governors, including Mr. Powell, only “for cause.”
No president has ever tried, but legal scholars say the language is generally interpreted as meaning the president could not remove Mr. Powell over a policy disagreement.
The law, however, does not address the president’s authority to remove Mr. Powell from his role as Fed chairman without removing him from the Fed’s board, a move that some of the president’s advisers have urged.
But it is far from clear such a decision would serve the president’s purpose. A replacement for Mr. Powell would require Senate confirmation, and this person would join a policymaking committee that voted unanimously for the December rate increase. That committee also might be inclined, on future rate decisions, to demonstrate its independence from the president.
While Mr. Trump has turned on his chairman, the Fed’s trajectory should not have been a surprise.
When Mr. Trump chose Mr. Powell as Fed chairman in the fall of 2017, he said, “Based on his record, I am confident that Jay has the wisdom and leadership to guide our economy through any challenges that our great economy may face.”
Mr. Trump also chose three of the other four members of the Fed’s board, all of whom joined Mr. Powell in voting for all four 2018 rate increases.
In conversations with friends and advisers, Mr. Trump has acknowledged responsibility for the selection of Mr. Powell. He told Stephen Moore, an economist at the Heritage Foundation, that it was “one of the worst choices I’ve ever made,” according to Mr. Moore.
Some of Mr. Trump’s economic advisers have encouraged him to remove Mr. Powell, arguing that the decision would reverse recent stock declines.
Others, including Mr. Mnuchin, have warned that Mr. Trump would harm his own interests.
Sarah Binder, a professor of political science at George Washington University, said presidents had often tried to shape Fed policy, but the current episode stood apart because Mr. Trump appeared to be acting against his own interest in a stable economy.
“I think what is the unusual part here is that it seems the president has created the crisis,” she said. “His intervention certainly seems to be making things worse for him and worse for the Fed and worse for the economy. It’s just very shortsighted, and we’re not used to that.”