U.S. President-elect Donald Trump has declared that he does not plan to remove Federal Reserve Chair Jerome Powell from his position upon taking office in January. In an interview on NBC News’ “Meet the Press with Kristen Welker,” Trump explicitly stated, “No, I don’t think so. I don’t see it,” when questioned about potentially seeking to replace Powell before his term ends in 2026. This statement contrasts with Trump’s previous criticisms of Powell, particularly regarding the Fed’s interest rate policies.
Trump’s relationship with Powell has been turbulent. During his first term, Trump frequently criticized Powell and the Federal Reserve for what he perceived as unnecessarily high interest rates that could hinder borrowing and spending, essential components for stimulating the economy. Trump had even considered dismissing Powell in 2018 over these disagreements, although he ultimately refrained from doing so, possibly due to legal constraints and the potential backlash from financial markets. Powell has consistently maintained that he would not resign prematurely if asked, citing that under the law, he and other Fed governors cannot be removed before their terms conclude without “cause.”
Despite these past frictions, Trump’s recent comments suggest a shift towards a more hands-off approach with the Fed. This might be influenced by the broader economic environment and Trump’s campaign promises to lower borrowing costs for American households. However, Trump’s economic policies, including his advocacy for across-the-board tariffs, could still pose challenges for the Fed’s mandate to manage inflation and employment.
Powell, appointed by Trump in 2018, was reappointed by President Joe Biden, showcasing a bipartisan acknowledgment of his leadership at the Fed. His reappointment and the legal independence of the Fed, which is subject to Congressional oversight, underscore the delicate balance between political influence and monetary policy autonomy in the U.S. In fact, this past Wednesday, Powell underscored the importance of the Federal Reserve’s independence, stating: “It allows us to make decisions that serve the best interests of all Americans at all times, rather than catering to any specific political party or outcome.”
Meanwhile, market expectations have been leaning towards further rate cuts by the Federal Reserve, with traders anticipating a reduction at the upcoming December 17-18 meeting. This expectation follows signs of a cooling labor market, suggesting the Fed might lower the policy rate to the 4.25%-4.50% range. Such a move would continue the easing cycle started in September, reflecting the Fed’s response to current economic indicators.
Trump’s acknowledgment that asking Powell to step down might not be successful indicates an understanding of the Fed’s quasi-independent status. While Trump has expressed desires in the past to influence Fed decisions directly, his current stance shows a recognition of the legal and institutional limits to presidential power over the central bank. This dynamic will likely be closely watched by both domestic and international observers as Trump prepares to reassume the presidency, with implications for U.S. economic policy, investor confidence, and global financial markets.
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