President-elect Donald Trump said in an interview that he wouldn’t fire Fed Chair Jerome Powell (R). He wouldn’t have an easy time removing Powell, if he chooses to try
By: Angela Palumbo
President-elect Donald Trump wouldn’t have an easy time removing Fed Chair Jerome Powell, if he chooses to try. And Powell is signaling he wouldn’t go down without a fight—and would push back hard if the president tries to compromise the Fed’s independence.
After the Federal Reserve cut interest rates by a quarter of a percentage point on Thursday, Powell was asked at a press conference if the president has the power to fire or demote him.
“Not permitted under the law,” Powell said tersely, reiterating his position that he wouldn’t resign if asked by the president.
The remark sparked the question—can a president fire the Fed chair? The answer isn’t clear, to say nothing of the turmoil that would ensue if the president faced off against a Fed chair refusing to go, challenging the Fed’s independence in the process.
“Firing the chairman of the Federal Reserve and Powell in general is a bit of a gray area in the legal system,” Russel Morgan, principal of The Morgan Legal Group, told Barron’s. “It’s noted that there is no specific statute that details whether or not a president can in fact remove a federal chair.”
Powell was nominated by Trump in 2017. President Joe Biden then nominated Powell for a second term in 2021, which expires in May, 2026. Trump has since been critical of decisions the Fed has made in its response to inflation.
On April 26, The Wall Street Journal reported that former Trump administration officials had been discussing a range of proposals that grant the president a role in Fed decisions. Trump also said to reporters at his Mar-a-Lago home in August that he thinks the president should have “at least [a] say in there.”
The president appoints the heads of more than 50 independent federal commissions, such as the Federal
Reserve Board. But the central bank has long guarded its independence from political meddling, backed up the law that created the Fed in the first place.
Under the 1913 Federal Reserve Act, the Fed was made accountable to Congress but its responsibilities were designed to be carried out “without political interference,” according to the Federal Reserve Bank of St. Louis. “Federal Reserve officials cannot be fired simply because the president or a member of Congress disagrees with Federal Reserve decisions about interest rates,” the St. Louis Fed says.
Having a say in interest rate decisions and flat out firing the sitting chair of the Fed aren’t the same, but if Trump wanted to remove Powell, he would have a long battle ahead of him. To start, Trump may have to find “cause,” or prove Powell’s inefficiency, neglect of duty, or malfeasance in office, according to a 1930s Supreme Court ruling on criteria for removing an FTC commissioner.
“It would have to go through an executive Judiciary Committee, so they would have to appoint a special counsel before the Senate to determine whether or not the chairman, Jerome Powell, did in fact breach any of his duties in his role as chairman,” Morgan said.
In a statement to Barron’s, Trump-Vance Transition Spokeswoman Karoline Leavitt said that Trump will begin making decisions on who will serve in his second administration soon, and those decisions will be announced when they’re made.
Some financial executives don’t think it will happen. Shmuel Shayowitz, president of mortgage bank Approved Funding, said he doesn’t believe Trump will try to fire Powell because of the uncertainty it would bring to the markets. With Powell’s term ending in 2026, Shayowitz said it’s likely the President-elect will wait to replace Powell, “without ruffling any feathers.”
“I think he’s just trying to influence him a little bit and maybe telegraph to the market what he thinks and that he wants interest rates to be lower, quicker,” Shayowitz said.
Part of the machinations may also involve pressure by Trump to get Powell to cut rates in order to further to stimulate the economy, says Brett House, an economics professor at Columbia Business School.
“He [Trump] would still like to see looser monetary policy conditions that would stimulate credit growth and create an even warmer economy for him to begin his next administration,” House said.
Even if Trump doesn’t blatantly try to remove Powell, another tactic may be to sideline him by appointing a “shadow” Fed Chair, as Barron’s has reported.
Powell has fiercely defended the Fed’s independence for years. It’s unlikely he would bend to political pressure now, even with his job on the line.
Barron
Update : President-elect Donald Trump said on December 8 that he will not try to replace Federal Reserve Chair Jerome Powell, whose term runs through May 2026.
In an exclusive interview with “Meet the Press” moderator Kristen Welker, Trump said, “I don’t,” when asked if he plans to cut short the central bank chief’s term.
“The chairman of the Federal Reserve, Jerome Powell, said he will not leave his post even if you ask him to. Will you try to replace Jerome Powell?” Welker asked during the interview at Trump Tower in New York City.
“No, I don’t think so. I don’t see it,” Trump replied. “But, I don’t — I think if I told him to, he would. But if I asked him to, he probably wouldn’t. But if I told him to, he would.”
Welker followed up, “You don’t have plans to do that right now?”
“No, I don’t,” Trump said.