US Fed’s Powell says Trump can’t fire him

Federal Reserve Chair Jerome Powell had a simple response Thursday as to whether he would leave his post if President-elect Donald Trump asked him to.
“No.”
Powell, speaking to reporters after Fed policymakers cut interest rates again, tried during his press conference to avoid the political fray. Still, he made clear that he’s not going anywhere. He declared that it’s “not permitted under the law” for presidents to remove members of the independent central bank.
Despite years of criticism of the Fed chief, the once and future president said over the summer that he would let Powell finish out his term, which doesn’t end until mid-2026 — “especially if I thought he was doing the right thing.” But close advisers to Trump — who once questioned whether Powell was a “bigger enemy” to the U.S. than China’s Xi Jinping — have suggested the Fed chief should simply resign.
Trump, who says he believes the president should have a say in monetary policy, has made no secret of his preference for low interest rates and will likely resume his previous habit of tweeting barbs at the Fed chief if he thinks borrowing costs are too high. He explored the question of whether he could fire Powell during his first term, a prospect that added to market turmoil at the time.
The Fed lowered rates again on Thursday, as expected, but the timing for future cuts is less clear — in part because Trump’s policies could alter the economy’s trajectory. Bond investors pushed up yields on Wednesday as they weighed the possibility that higher tariffs and fewer immigrant workers could stoke inflation.
Powell told reporters that Fed officials always take policies — both from the executive branch and Congress — into account if they affect the economy, but “we don’t know what the timing and substance of any policy changes will be,” he said. “We therefore don’t know what the effects on the economy would be.”
Powell and the Fed are now facing a more dangerous environment in Washington than they did during the first Trump administration. While the president-elect says he deserves to weigh in on the decision-making of the technocratic institution, the Fed jealously guards its freedom to make choices without consideration of short-term politics. That’s on top of already-growing pressure on the central bank to keep the economy humming and inflation under control while both parties pile on fiscal debt.
“Conceptually, Trump 2.0 could look like 1.0 in the sense of an incessant push for lower rates,” said Sarah Binder, a George Washington University professor who’s an expert on central bank politics. “What’s different is just the fiscal policy situation and the level of debt and the level of inflation that he inherits. It just looks quite different from the economy that he inherited in 2017.”
Trump’s reaction to the central bank could also serve as an early indicator of how extensively the president-elect plans to reshape traditional government bureaucracy.
His stance could empower lawmakers who have long been eager to alter the central bank’s approach to policy, though it’s unclear what form such changes might take. Key Republicans in Congress have expressed a desire to tie the Fed’s monetary policy decisions more closely to formulaic rules, which tend to lead to higher rates over time.
Rep. Bill Huizenga (R-Mich.) said he worries that the Fed is too “politically sensitive.” Some Republicans questioned the central bank’s decision to ease off on the economy, amid signs that the labor market is weakening, by cutting interest rates by half a percentage point in September, just weeks out from the election.
“I believe in Fed independence, but then they have to act like they’re independent, right?” Huizenga told POLITICO. “I have questioned the decisions of the Fed on interest rates, even recently, as to whether they are purely independent, data-driven.”
Fed officials have repeatedly said they make rate decisions solely based on their assessment of the economy.
It’s not just Powell who might be in trouble. Trump’s advisers have entertained the idea that the president could remove Michael Barr, the Fed’s regulatory czar, according to people who’ve spoken with them.
The law isn’t clear on whether he would have the authority to do so, but Christina Skinner, an expert on financial policy at the Wharton School of the University of Pennsylvania, argued earlier this year that the president has more latitude on this front than on monetary policy. Constitutionally, the power to regulate money resides with Congress, but bank regulation falls into a different category.
“I think the president could remove the vice chair for supervision and that would not be an affront to central bank independence,” she said.
The question is highly contentious, however. Todd Phillips, a Georgia State University assistant professor and Roosevelt Institute fellow, said Trump would actually have more power to demote Powell than he would Barr. That’s because the Fed chair — unlike the vice chair for supervision — has authority over staff and Fed board meetings, he said.
“The president’s removal powers are to preserve his executive authority, and can (most likely — this has never been litigated) remove officers from their solely executive positions,” Phillips said in an email. “The president can demote Powell and make him just a governor. The [vice chair for supervision] is different.”
More broadly, some of his allies are talking about overhauling the Fed.
“We ought to look at governance,” Stephen Bannon told POLITICO on Wednesday morning, as Trump’s victory came into focus. “The whole structure of the Federal Reserve, as a start.”
Eleanor Mueller and Ben Schreckinger contributed to this report.