Powell made it clear that even if Trump requests him to resign as Federal Reserve Chair, he will not be "dismissed" under legal protection.

Written by: Du Yu

Source: Wall Street Journal

On Thursday, November 7, during a press conference following the Federal Reserve's expected interest rate cut, Powell was repeatedly asked whether he could retain the position of Federal Reserve Chair during Trump's second presidential term, leading him to lament, "I really don't intend to answer too many political questions."

For example, a reporter mentioned that some of Trump's campaign advisors suggested that if Trump, as president, requests the Federal Reserve Chair to resign, Powell should step down; would you leave? Powell briefly answered with one word: "No."

The reporter then followed up, asking if he believes he is legally required to resign. Powell again briefly answered with one word: "No."

Next, someone asked whether the president has the right to fire or demote him, and whether the Federal Reserve is certain that the president has the legal authority to arbitrarily demote other Federal Reserve governors in leadership positions. Powell stated, "The law does not allow it."

Finally, someone persistently asked whether Trump, who has been criticizing Powell's performance, is concerned about his impact on the independence of the Federal Reserve, to which Powell replied, "I won't be discussing political issues today, but thank you for asking."

According to media reports, an anonymous senior advisor to Trump revealed that Trump might allow Powell to continue leading the Federal Reserve until his term ends in May 2026, but warned that "Trump could change his mind at any time." However, in July, Trump had casually stated his intention to let Powell complete his term as Federal Reserve Chair.

Gary Cohn, who served as the White House economic policy director during Trump's first presidential term, intended to take on the role of Federal Reserve Chair, but sources said Cohn resigned in protest of Trump's steel tariffs, making it difficult for him to secure the position. Others have suggested that former Federal Reserve Governor Kevin Warsh and former Chief Economist Kevin Hassett of the Trump administration are more likely candidates for the Federal Reserve Chair position.

Public records show that during Trump's presidency, he frequently criticized the Federal Reserve and Powell, even threatening to dismiss him, arguing that the pace of monetary policy easing was not fast enough and was hindering the prosperity of the U.S. economy. In October, Trump also stated that the President of the United States should have the right to participate in interest rate decisions and to comment on whether rates should be raised or lowered.

Trump has also criticized the Federal Reserve for its lack of transparency, believing that the policy deliberations of the Federal Reserve are conducted privately, with the complete minutes of discussions released weeks later. He hopes for real-time publication of FOMC meeting minutes and economic reports and wishes for meetings to be conducted in front of cameras.

In addition to criticizing Powell for having made many wrong decisions, Trump also stated last month at an event hosted by the Chicago Economic Club that the Federal Reserve Chair is one of the easiest jobs in the government.

"You only need to go to the office once a month and say, 'Let's flip a coin (to decide monetary policy),' and then everyone talks about you like you're a god."

Today, Powell clearly stated that the upcoming U.S. elections would not affect monetary policy in the short term, but also warned that any changes in the government while the Federal Reserve seeks to lower interest rates could affect monetary policy.

"In principle, any policy of the U.S. government or policy enacted by Congress may have economic effects over time, thus, along with countless other factors, these economic forecasts will be incorporated into the Federal Reserve's economic models and considered accordingly."

After Trump's victory, the market has lowered its expectations for interest rate cuts in January next year, with the more mainstream view suggesting a pause in rate cuts at that time, with the probability rising from 44% a week ago to 54%, while the likelihood of a 25 basis point rate cut in December has slightly decreased from 77% to 67%.

Some analysts pointed out that Trump's election has sparked speculation that the Federal Reserve may lower interest rates at a slower and more gradual pace, as policies to restrict illegal immigration and implement new tariffs could raise inflation.