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Fed Chairman Powell facing toughest call yet as Trump pushes for rate cut

When asked Tuesday if he intended to fire or demote Powell, Trump told reporters, "Let's see what he does."

Wall Street remained largely mute Wednesday ahead of a much-awaited decision by the Federal Reserve to raise, hold, or lower the nation’s benchmark interest rate.

Investors chose to stay put in the lead-up to the 2 p.m. ET announcement, opting out of making any substantial trades ahead of what could be Fed Chairman Jerome Powell's most important decision since he took the helm of the nation's central bank in February 2018.

The Fed's monetary policy strategy must balance the effects of the ongoing trade war with China, a global economic downturn, and rising geopolitical risks — while also staring down intensifying pressure from President Donald Trump, who has frequently lambasted Powell, whom he appointed, for raising rates four times last year.

Trump has repeatedly touted the strong economy as one of the successes of his presidency and believes a rate cut would drive up the value of the stock market.

“If he did nothing, or perhaps even loosened, we would be in my opinion, just an opinion, 10,000 points higher than already a very high number,” Trump said last month. As he ramps up his re-election bid for 2020, a tighter monetary policy and the possibility of an economic downturn could endanger those prospects.

While it is not unheard of for presidents to pressure the Fed, Trump has repeatedly — and very publicly — excoriated Powell, and has reportedly considered either firing or demoting him. Trump acknowledged he "does not have the ability" to take such measures, and a spokesperson for the Federal Reserve said Tuesday that “under the law, a Federal Reserve Board chair can only be removed for cause.”

When Trump was asked by reporters outside the White House on Tuesday if he intended to remove Powell, he told reporters, "Let's see what he does."

The intensifying political pressure now puts Powell in an almost impossible position, wherein any rate cut that is warranted by economic metrics might give the impression that the Fed has given in to the whims of the White House.

According to the Federal Reserve Act, "though the Congress sets the goals for monetary policy, decisions of the Board — and the Fed's monetary policy-setting body, the Federal Open Market Committee — about how to reach those goals do not require approval by the President or anyone else in the executive or legislative branches of government."