Fed’s Powell says he won’t step down even if asked by Trump

Federal Reserve Chairman Jerome Powell said Thursday that he would refuse to step down early if incoming President Donald Trump tried to oust him, adding that he could not be legally removed anyway.

Speaking at a press conference after a recent meeting of the rate-setting Federal Open Market Committee, Powell was asked if he would step down from leading the central bank if asked by Trump, who has repeatedly attacked him in his first term as president. Powell said an emphatic “no” and noted that removing him or any of the other Fed governors before the end of their terms is “not permitted under the law.”

Powell spoke after the Fed met expectations and cut its interest rate target range by a quarter percentage point to between 4.5% and 4.75%, as officials continue to normalize monetary policy amid cooling inflationary pressures.

Ahead of the US national elections on Tuesday, the Fed was widely expected to move forward with interest rate cuts.

Powell on Thursday brushed aside numerous questions about what Trump’s stated policy objectives might mean for the central bank’s decision-making. “In the near term, the election will have no impact on our policy decisions,” Powell said, adding, “We don’t speculate, we don’t speculate and we don’t assume what the broader government might do.”

Earlier Thursday, CNN reported that a Trump adviser said the president-elect would keep Powell on until the end of his leadership term, which is set to expire in May 2026. Powell’s term as governor extends to the end of January, 2028.

CNN reported that Trump is considering former Fed Governor Kevin Warsh, now an outspoken critic of the central bank, and his former administration chief economist Kevin Hassett as potential Powell replacements.

The Fed has leadership roles that are designed by law to protect them from political pressure and remove them outside of their formal terms.

Strained relationships

Trump named Powell as Fed chair in early 2018 to replace Janet Yellen, who later became President Joe Biden’s Treasury secretary. Biden reappointed Powell to his current term.

But relations between Trump and Powell soured, after Trump repeatedly attacked the Fed and its chief during his first term for the central bank’s policy choices, though policymakers regularly shied away from harsh words. Trump’s Fed attacks break with decades of presidents articulating direct criticism of the central bank, which operates with legal independence subject to congressional oversight.

Any attempt to oust the Fed leader, even if unsuccessful, is likely to be received very negatively by financial markets and will fuel fears of increased price pressures.

At the same time, policies Trump says he favors — high and expansive trade tariffs and mass deportations of undocumented immigrants — are likely to reignite the inflationary fires the central bank has successfully cooled.

If Trump’s policies become that reality, it could prevent the Fed from cutting rates as otherwise expected, and even force the central bank to raise rates. For some observers, that suggests the Fed and Trump may be on a collision course.

But for now, the Fed has some breathing room. “President-elect Trump is likely to push the Fed to cut interest rates more aggressively than he did during his first term, but at least over the next year he will have less impact on the path of interest rates because of the way the Fed system is structured. White insulate rate decisions from House pressure,” said Bill Adams, chief economist at Comerica Bank.