US President Donald Trump told reporters on Wednesday morning it was "highly unlikely" he would fire the chair of the US Federal Reserve, Jerome Powell, after it was reported he broached the issue in a letter to House Republicans late Tuesday night, according to the New York Times.

A senior White House official said that Trump signaled he would likely fire Powell after securing approval from other Republicans on Tuesday night. Congresswoman Anna Paulina Luna tweeted shortly afterward: "Jerome Powell is going to be fired. Firing is imminent".

However, when Trump met the crown prince of Bahrain at the White House on Wednesday morning, he told a reporter he will not fire Powell unless he is involved in some kind of fraud.

The US dollar index dropped 0.8 percent on Wednesday morning, and the stock market took a brief dive that rattled investors, though it had stabilized by midday.

Trump and his administration have repeatedly expressed frustration with Powell for not lowering interest rates, as well as spending $2.5 billion on renovating the central bank's headquarters. Earlier this month, Trump called on Powell to resign immediately. In the past, he has accused Powell of costing the US hundreds of billions of dollars, even though Powell was appointed by Trump in 2017 during his first presidency.

Powell said he would have lowered the interest rate if it weren't for the tariffs Trump is imposing. With the significant policy changes, the central bank wants to see how the US economy will be affected before making any changes so they can deliver "macro stability, financial stability, and economic stability for the benefit of all people."

Powell cannot be fired solely over policy disagreements unless there is misconduct or incapacity, and such a move would likely be challenged in court. Firing him outright for policy reasons is not legally straightforward and would be unprecedented in modern US history.

Experts also warned that removing Powell could undermine the central bank's independence, which would be detrimental, as financial markets favor independent central banks that aren't influenced by political parties.

"The empirical and academic evidence on the impact of a loss of central bank independence is fairly clear: In extreme cases, both the currency and the bond market can collapse as inflation expectations move higher, real yields drop and broader risk premia increase on the back of institutional erosion," George Saravelos, global head of FX strategy at Deutsche Bank, told CNN. Sarevelos expected a big drop of 3 to 4 percent in dollar currency in 24 hours if Powell is fired.

Trump denied drafting a letter about firing Powell, mentioning he simply raised the idea. "Almost every one of them said I should (fire Powell), but I'm more conservative than that."

"Fortunately, we get to make a change in the next eight months or so. And we'll pick somebody that's good. I just want a fair job. We want to see a lower interest rate. Our country deserves it," Trump said.

Powell will step down as chair of the Federal Reserve in May 2026. However, he can choose to stay as a member of the board of governors until 2028.

"The independence of the Fed is absolutely critical, and not just for the current Fed chairman, who I respect, but for the next Fed chairman," said Jamie Dimon, chief executive at JPMorgan Chase. "Playing around with the Fed can often have adverse consequences, absolutely opposite of what you might be hoping for."

bilinlin@chinadailyusa.com