Powell says he will not resign and that Trump cannot force him

WASHINGTON — Federal Reserve Chairman Jerome Powell said he and other central bank officials can’t do that deposed or demoted by the president for no reason.

During his press conference after the Federal Open Market Committee, Powell gave a terse answer when asked whether he would bow to the new administration’s pressure to resign: “No.”

Powell faced a barrage of questions President-elect Donald Trump policy agenda as well as his personal experience with the once and future resident of the White House. Powell largely declined to discuss anything related to this week’s presidential election or its potential implications for monetary policy.

The Fed chairman, however, did not hesitate when asked whether the president could fire or demote a member of the Federal Reserve Board of Governors at will – from chairman or vice chairman to a standard board seat.

“Not allowed by law,” Powell said bluntly.

Powell’s comment came amid reports that Trump’s transition team is looking to shake up the Fed’s governing body by elevating or appointing board members who better align with the president’s policy preferences. This includes Powell and Vice Chairman for Supervision Michael Barr, the Fed’s top supervisory policymaker.

Under the Bank Act of 1935, Fed governors can only be removed for cause, meaning inefficiency, dereliction of duty, or misconduct – an important safeguard for the Fed’s political independence. But the statute makes no mention of the removal of chair or vice chair positions, nor does the Dodd-Frank Act of 2010, which created the vice chair in an oversight role.

This ambiguity leaves the door open for Trump to try to strip Powell and Barr of their titles, but could also lead to a high-stakes legal battle between the White House and the central bank.

Powell’s chairmanship ends in 2026, as does Barr’s term as vice chairman. Both officials would be eligible to remain on the board after their leadership positions expire, with Powell’s underlying seat expiring in 2028 and Barr’s in 2032.

In the short term, Powell said this week’s presidential outcome will have “no effect” on Fed policy.

While there is some concern among policy and economic analysts about the monetary policy implications of Trump’s proposals for universal tariffs and lower taxes, Powell said it is still too early to know what these might look like in practice.

“We don’t know what the timing and content of any policy changes will be,” Powell said. “We therefore do not know what the effects could be on the economy, and especially not whether and to what extent these policies would be important for achieving our objectives of maximum employment and price stability. We don’t guess. We don’t do that. speculate.”

At today’s meeting, the FOMC cut its benchmark interest rate by a quarter of a percentage point. This was the second straight meeting in which the committee eased its monetary policy stance, following the group’s half-point cut in September.

Looking ahead, Powell said the FOMC will act “prudently” as it pursues a neutral rate — one that neither stimulates nor suppresses demand. In doing so, he said, the committee will be careful not to move so slowly that it harms the labor market, nor so quickly that inflation could flare up again.

“We are trying to choose between the risk of acting too quickly and perhaps undermining our progress on inflation, or acting too slowly and allowing the labor market to weaken too much,” Powell said. “We are trying to be in the middle ground where we can maintain strength in the labor market while allowing further progress on inflation. We think this is where we are now, but that’s the question we’re going to ask in December. ) and in other meetings.”

The next and final meeting of the FOMC in 2024 will take place on December 17 and 18.