Trump Rules Out Replacing Federal Reserve Chair Jerome Powell

Federal Reserve Chair Powell Supported by Trump | Mr. Business Magazine

Category: News

Source: .marketwatch.com

President-elect Donald Trump has clarified that he does not intend to remove Federal Reserve Chair Jerome Powell from his position. In a recent interview, Trump confirmed that he has no plans to ask Powell to resign or replace him, marking the first public backing of Powell since the presidential election.

When asked directly about replacing Powell, Trump stated that he doesn’t see the need for such action. He added that while Powell might comply if directly instructed, he does not plan to ask for his resignation. Trump firmly reiterated that he has no intention of making any changes to the leadership of the Federal Reserve.

A History of Mixed Relations

This announcement follows years of mixed messaging from Trump regarding Powell. Despite backing Powell during the current transition, Trump has previously expressed frustration with the Fed Chair, particularly over interest rate decisions. In 2018, after the Federal Reserve raised interest rates, Trump repeatedly threatened to remove Powell, at one point labeling him the enemy.

In March 2020, as markets faltered during the onset of the COVID-19 pandemic, Trump criticized Powell for making poor decisions but later praised him for cutting interest rates to zero to prevent economic collapse.

Powell was initially nominated by Trump in November 2017 to lead the Federal Reserve and was later reappointed by President Joe Biden for a second term.

Legal Barriers to Removing Powell

While Trump has occasionally suggested removing Powell, legal obstacles make this process challenging. Federal Reserve Chairs cannot be fired at will by the president. The law only permits removal for cause, a standard that would likely require legal interpretation and possibly a ruling from the Supreme Court.

In response to questions about whether he would resign if asked by Trump, Powell has previously stated that he would not, citing the legal protections afforded to his position. Any attempt to dismiss Powell would likely result in a lengthy legal battle, allowing him to remain in office until the end of his term.

Trump’s Views on Interest Rate Decisions

Over the years, Trump has frequently criticized the Federal Reserve’s handling of interest rates, accusing Powell of being overly political. In past interviews, Trump argued that the central bank’s decisions on rate cuts were influenced by political considerations, including potentially aiding electoral outcomes.

Trump also took issue with the Fed’s approach to rate adjustments, claiming that Powell had initially set rates too high and then overcorrected by cutting them excessively.

To address his dissatisfaction with the Fed’s independence, Trump has suggested that the president should have input in interest rate decisions. He argued that his financial success gives him better instincts than many individuals involved in the Federal Reserve, including the Federal Reserve Chair.

The Federal Reserve’s Independence

The Federal Reserve operates as an independent body, insulated from political influence, to ensure it can make objective decisions aimed at balancing job creation and inflation. Trump’s proposal to have a say in the Fed’s decisions would challenge this independence, raising questions about whether congressional approval would be required to alter the Fed’s structure.

Powell has consistently defended the independence of central banks, emphasizing that it is a proven arrangement for maintaining lower inflation rates. He expressed hope that the Fed’s autonomy would continue, describing it as beneficial to the public and vital for the nation’s economic stability.

Looking Ahead

While Trump’s recent comments suggest a more cooperative approach toward the Federal Reserve Chair Powell’s leadership, his past criticisms and proposals indicate a continued interest in influencing Federal Reserve policies. As Powell’s term continues, the balance between maintaining the Fed’s independence and addressing political pressures will remain a key issue for the US central bank.