Fed Chair Powell Refuses Early Exit

By Michael S. Derby

(Reuters) – Federal Reserve Chair Jerome Powell stated on Thursday that he would not resign early if President Donald Trump attempted to oust him, emphasizing that such removal is not legally permissible.

During a press conference after the Federal Open Market Committee's meeting, Powell affirmed his intention to remain in office, noting that he and other Fed governors cannot be removed prematurely under the law. Trump had previously criticized him, but Powell firmly responded, "no" when asked if he would step down.

Following the meeting, the Fed announced a quarter percentage point cut in its interest rate target range, now between 4.5% and 4.75%, as it strives to normalize monetary policy amid diminishing inflation concerns.

Anticipation of interest rate cuts before the U.S. national elections had been widespread. Powell remarked that the election would not influence immediate policy decisions, stating, "we don't guess, speculate and we don't assume what the broader government might do."

CNN reported earlier that a Trump advisor mentioned the president-elect would retain Powell until the expiration of his term in May 2026. Powell’s governorship extends to January 2028.

Potential candidates to replace Powell include former Fed Governor Kevin Warsh and former Chief Economist Kevin Hassett, both of whom have criticized the Fed.

Trump appointed Powell as chair in early 2018, replacing Janet Yellen, who became Treasury Secretary under President Biden. However, Powell's relationship with Trump soured, facing frequent criticism from the president regarding Fed policies, a departure from historical norms of presidential criticism of the central bank.

Attempts to remove a Fed leader could adversely affect financial markets and heighten inflation fears. Trump's preferred policies, like rigorous trade tariffs and immigration deportations, may reignite inflation, complicating the Fed's rate cut strategies. Observers suggest this could lead to potential conflicts between Trump and the Fed.

Currently, Powell's Fed enjoys some operational independence. According to Bill Adams, chief economist for Comerica Bank, while Trump may push for accelerated rate cuts as he did previously, the Fed is structured to remain insulated from direct political influence in its rate-setting decisions.