Federal Reserve Chair Jerome Powell is standing his ground. In as few words as possible, a defiant Powell made clear he’s not budging from his chair when President-elect Donald Trump is back in office.
“No,” is all Powell said when asked a reporter asked if he would resign if Trump asked him to leave.
His one-word response came during a press conference two days after Election Day. When another reporter pressed for more, asking if the president has the power to fire or demote the Fed chair, Powell responded in five words.
In six total words, he shut down questioning on the possibility of the man who originally gave him this post taking it away. Jerome Powell was first appointed as Fed Chair by Trump during his first term as president. But the two have had a very public feud since 2018, when Trump started pushing back on the Fed’s interest rate policy.
“I put a very good man in the Fed, I don’t necessarily agree with it, because he’s raising interest rates,” Trump said in July 2018.
“I think the Fed is out of control. I think what they’re doing is wrong,” Trump escalated two months later.
“I think they should drop rates and they should get rid of quantitative tightening, you would see a rocket ship,” Trump advised in April 2019.
That feud between Powell and Trump is alive and well today. Earlier this year, a Wall Street Journal report said Trump allies were looking for ways to blunt the Fed’s independence in a Trump victory, and even empower Trump to oust Fed Chair Powell before his term expires in 2026. Trump’s advisers did not deny the report.
Then later in the summer of 2024, Trump himself said presidents should have a say in interest rate policy.
“I feel the president should have at least say in there, yeah. I feel that strongly,” Trump said in August 2024. “I think that, in my case, I made a lot of money, I was very successful, and I think I have a better instinct than, in many cases, people that would be on the Federal Reserve or the chairman.”
“If President Trump would like to exert more influence on the Fed, he can absolutely do it this time around, simply because the political landscape has changed,” the Fed Guy’s Joseph Wang told Straight Arrow News, pointing to the “red wave” that swept the nation this election.
Wang said he does believe Trump will let Powell serve out his term and doesn’t believe he has the legal authority to oust him, but said there are ways he can undermine him or increase Trump’s influence on policy.
“One of the potential Trump Treasury secretaries has floated that idea where maybe Trump could just nominate and confirm the next Fed chair after Jay Powell and just have this Fed chair go around and give all sorts of speeches and influence the markets in that way,” Wang said. “That’s very creative. I don’t know that it will happen.”
“Or you could just pass new laws, nominate new governors, pack the Fed, or you could have legislation that maybe defines the Fed’s mandates in ways that are pleasing to the executive,” Wang continued. “Or if you look back to history, in the beginning, when the Fed first started in the early 20th century, the Treasury secretary actually sat on the [Federal Open Markets Committee]. They’re participating in the discussion. So there’s a whole whole bunch of ways this can go.”
Trump’s interest in influencing Fed policy concerns Democrats and Republicans alike.
“I have to think about the Fed for the next 50 years, not the next four, and independence is important.” Sen. Thom Tillis, R-N.C., said as the Wall Street Journal reporting surfaced.
“The reason that we have an independent central bank is because the political branches often have a temptation to do things that are good for them today, for their current election cycle, that have bad consequences later on,” Wang explained. “You see this in Latin America all the time. Government comes to power, spends a whole bunch of money to get elected, and then the inflationary problems are someone else’s problem. So we don’t want that to happen here.”
The Federal Reserve and its chair serve under a dual mandate: price stability and maximum employment. The main tool it has to influence monetary policy is the federal funds target rate, which is the rate banks charge each other for overnight lending. Those rate decisions ripple throughout the economy.
As inflation surged post-pandemic, the Fed eventually hiked rates to levels not seen in decades to try to slow the money supply. As inflation has gotten closer to the Fed’s 2% target and cracks in the labor market are starting to appear, the Fed began a rate-cutting cycle in September to ease conditions. Two days following the election, the Fed again cut its rate, by 25 basis points. The open market committee’s next rate decision will be Dec. 18.