Federal Reserve Chair Jerome Powell Resists Resignation

Investing.com – When pressed last week about resigning if asked by incoming US President Donald Trump, Federal Reserve Chair Jerome Powell was curt in his reply.

"No."
He reiterated this sentiment when reporters questioned whether Trump had the authority to remove him. Powell, a law degree holder who was nominated by Trump to lead the Fed in 2017, stated firmly that such a move was not legally permissible.

The Wall Street Journal indicated Powell would likely lodge a legal challenge to any attempt to oust him before his term ends in 2026. Moreover, it noted that Powell and other senior Federal Reserve officials have carefully refrained from making provocative statements regarding Trump or his election win.

In 2018, when then-President Trump considered dismissing Powell over interest rate hikes, central bank officials prepared for a legal challenge to protect the Fed's independence.

For Powell, defending his position would be crucial to ensure that future Federal Reserve Chairs cannot be removed due to policy disagreements with the White House.

Trump has not recently indicated a desire to remove Powell, stating in June that he would allow him to complete his term, especially if he felt Powell was performing well.

Advisers to the president-elect appear divided on how far Trump should go with regards to Fed changes, as it may be more complicated than during his previous four-year tenure. Currently, there isn’t an open position on the Fed’s seven-member board; during his prior term, Trump filled five vacancies within his first year.

Additionally, attempts to alter Fed leadership might disrupt ongoing efforts to combat inflation without causing economic or labor market issues. Recently, the Fed cut rates by 25 basis points, noting steady economic activity, although markets remain uncertain about the timeline for future rate adjustments.

Some analysts speculate that Trump's proposed policies, especially a blanket tariff on US imports, could raise inflation and lead the Fed to maintain higher rates than expected. This potential increase in volatility may heighten the likelihood of conflict between the Fed and the new Trump administration.