BofA CEO Moynihan: An Independent Fed Is Critical for Economy

Bank of America chairman and CEO Brian Moynihan joins Bloomberg to talk President Trump's campaign against Federal Reserve chair Jerome Powell, how analysts are viewing the fed's path in the second half the year and the bank's record second quarter earnings.

President Donald Trump denied he is seeking to remove Federal Reserve Chair Jerome Powell, after raising the idea in a closed-door meeting with congressional Republicans that leaked to the media.

“No, we’re not planning on doing anything,” Trump told reporters on Wednesday. He later added, “I don’t rule out anything, but I think it’s highly unlikely, unless he has to leave for fraud.”

A White House official, speaking on the condition of anonymity earlier Wednesday, said they expected Trump to soon move against the Fed chief after his meeting with members of Congress visiting the White House to discuss cryptocurrency legislation. Some lawmakers also left that Tuesday evening meeting with that impression, and Trump acknowledged that he had polled the participants about dismissing Powell.

The president’s remarks in the Oval Office left open the possibility of ousting Powell for cause. Trump and his allies have lambasted the Fed chair over the central bank’s decision to hold interest rates steady and the cost of the central bank’s renovations of its Washington headquarters.

The events marked the latest turn in the long-running saga between Trump and Powell. The president has repeatedly floated the prospect of firing the Fed leader over the bank’s monetary policy, but has stopped short.

Many analysts have warned that if Trump were to follow through on ousting Powell it would roil financial markets and lead to a consequential legal showdown over the independence of the central bank. But the reaction on Wednesday was muted.

On the early news that the president would likely make the move, stocks, the dollar and short-dated yields all declined, but showed no drastic repricing.

“The market did not react that badly before Trump disavowed the reports,” Derek Tang, an economist at LH Meyer/Monetary Policy Analytics in Washington, wrote in a note to clients. “Were it a trial balloon to test the waters, it was a success and might embolden Trump. Now the window of acceptability has shifted, for the worse.”

If Fed independence did get “broken,” Thomas Thornton, founder of the hedge fund Telemetry, said that would inject risk into the bond market. “with this potential of a Fed chair being ousted combined with the continued risk of high deficits and out of control US debt levels, the risk of the long-end rates spiking is increasing.”

--------

Watch Bloomberg Radio LIVE on YouTube

Weekdays 7am-6pm ET

Follow us on X

Subscribe to our Podcasts:

Bloomberg Daybreak

Bloomberg Surveillance

Bloomberg Intelligence

Balance of Power

Bloomberg Businessweek

Listen on Apple CarPlay and Android Auto with the Bloomberg Business app:

Apple CarPlay

Android Auto

Visit our YouTube channels:

Bloomberg Podcasts

Bloomberg Television

Bloomberg Originals