In a wide-ranging Sunday interview on NBC’s “Meet the Press,” President-elect Donald Trump softened his previous position on Federal Reserve Chairman Jerome Powell, backing off previous threats to fire the head of the central bank whom Trump appointed to the position in 2018.
When asked by moderator Kristen Welker about whether he has plans to ask or order Powell to step down from his chairmanship, which runs through 2026, Trump said, “I don’t.”
“No, I don’t think so. I don’t see it,” the president-elect said. “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.”
Powell, a Republican and former private equity executive, joined the Federal Reserve in 2012, ascended to the chairmanship in 2018 via Trump’s appointment and had his term renewed by President Joe Biden in 2022.
Could Trump dump Powell if he wanted to?
While Trump has, at times, pilloried Powell and some of the Fed’s policy decisions, and threatened to fire the current chairman, experts generally agree that the U.S. president does not have the power to order personnel changes at the agency without cause and the courts have previously ruled that a difference of opinion on policy matters does not rise to that level.
Congress established maximum employment and stable prices as the key macroeconomic objectives for the Federal Reserve in its conduct of monetary policy. Federal lawmakers also structured the Fed to ensure that its monetary policy decisions focus on achieving that two-part mission outside the impacts of political pressures. To that end, members of the Fed’s Board of Governors are appointed to staggered 14-year terms, and the board chairperson is appointed to a four-year term. Also, elected officials and members of the president’s administration are not allowed to serve on the board.
Trump has also shared the opinion that he should have a say in the Fed’s interest rate decisions, in spite of the body’s congressionally mandated independence.
“I don’t think I should be allowed to order it, but I think I have the right to put in comments as to whether the interest rates should go up or down,” Trump said in an interview with Bloomberg News at the Economic Club of Chicago in October, per NBC News.
What Powell has to say
While Powell was asked repeatedly at a Nov. 7 press conference to weigh in on how the economy and the Fed’s policy stance moving forward would be impacted by Trump’s election victory, the Fed chairman noted no policy changes have yet been made and refused to speculate about potential future actions by the president-elect’s administration.
“In the near term, the election will have no effects on our policy decisions,” Powell said. “Here, we don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy will be. We don’t guess, we don’t speculate and we don’t assume.”
In response to one reporter’s question during the press event about whether he would step down from his chairmanship if asked by Trump, Powell responded “no” and later said a sitting president is “not permitted under the law” to order personnel changes at the Fed outside its congressionally dictated process.
The Fed’s Open Market Committee will make its next interest rate assessment at the monetary body’s final policy meeting of 2024, scheduled for Dec. 17-18. The Fed has shifted its policy focus over the last few months and levied two straight reductions to its benchmark interest rate. Powell recently said there is consensus among the body’s board of governors that U.S. inflation is “moving reliably” toward the target goal of 2%.
At its November meeting, the Fed followed up on its September decision to cut its intra-bank overnight lending rate by 0.5% by levying an additional 0.25% reduction and bringing the federal funds rate into the 4.5% to 4.75% range.
Before the September reduction, the first in four years, the Fed’s rate had stood at 5.25% to 5.5% since last summer and was the highest in 23 years after a series of 11 straight increases levied earlier by the monetary body in its efforts to quash red-hot U.S. inflation.