Federal Reserve Chairman Jerome Powell has rejected speculation about his future at the US central bank, insisting that the president does not have the authority to remove him from his role and he will not quit.
Speaking to reporters on Thursday, Powell clarified that "it is not permitted under law" for the White House to force him out before his term expires in 2026.
Asked if he would step down if asked to by Donald Trump, who is set to return to office, Powell said firmly: "No."
This declaration comes amid reports that Trump allies have explored ways to increase White House influence over the Fed, potentially by nominating a replacement early.
While Trump had appointed Powell in 2017, their relationship soon soured, with Trump regularly criticizing Powell on social media over Fed interest rate policies.
President Joe Biden reappointed Powell in 2022 for another term is set to expire in 2026. A chair serves for a four-year term after appointment, but may be reappointed for several consecutive four-year terms.
Trump, who defeated Democratic Vice President Kamala Harris in this week's presidential election, campaigned on tariffs on imports and crackdown on immigration which could have a broad and unpredictable impact on the economic landscape in the coming months.
Under US law, the Federal Reserve operates as an independent agency, and its chairman can only be removed "for cause" — a high standard usually requiring serious misconduct or incapacitation. This design protects the Fed from political pressures that could undermine its mission to control inflation and maintain employment stability.
Latest Rate Cut Amid Economic Uncertainty
Powell’s comments came after the Fed announced a cut in its key lending rate, lowering it to a range of 4.5%-4.75%. This marks the second consecutive rate cut, following a sharp hike cycle that pushed rates from near zero to over 5% last year to combat high inflation.
While forecasters expect rates to continue easing, they warn that Trump’s economic agenda could put upward pressure on inflation, potentially complicating the Fed’s task. The former president has pledged a sweeping 10% tariff on all imports, which economists say could increase consumer costs. Trump’s proposed tax cuts could further boost inflation by encouraging spending, while his plans to restrict immigration could shrink the workforce and drive up wages.
Powell noted it is too early to assess the potential impact of Trump’s policies on the economy:
“We don’t know what the policies are, we don’t know when they will be implemented. In the near term, the election will have no effects on our policy decisions.”
Fed’s Response to Inflation and Economic Challenges
The Fed’s rapid rate hikes over the past two years aimed to curb inflation, which soared to over 9% in mid-2022. Those increases led to higher borrowing costs for mortgages, credit cards, and loans, which became a source of public frustration and figured prominently in the recent election.
In recent months, however, inflation has cooled to 2.4%, allowing the Fed to cut rates and ease financial conditions. Thursday’s unanimous rate cut decision brought rates down by 0.25 percentage points, with officials indicating that more cuts are possible, though they remain cautious.
"We don't think it's a good time to be doing a lot of further guidance - there's a fair amount of uncertainty," Powell said.
Markets Brace for Slower Easing Pace
Investment analysts caution that economic uncertainty and stronger data could lead the Fed to slow the pace of rate cuts next year. Whitney Watson, from Goldman Sachs Asset Management, said that while another rate cut is likely in December, the Fed may adopt a more cautious approach going forward, even “skipping” cuts if necessary.
On the same day, the Bank of England warned that UK interest rates may also remain high for longer than anticipated.
"In the US, it seems interest rates will stay higher for longer as the Fed will need to tread very carefully," said Lindsay James, an investment strategist at Quilter Investors.
Why the President Can’t Fire the Fed Chair
In the United States, the Federal Reserve is an independent central bank, and its chairman is appointed for a four-year term that cannot be cut short by the president. This system is intended to shield monetary policy from political interference. A president can appoint Fed governors when their terms end but cannot directly dismiss the Fed chair without cause, which would require proof of serious misconduct.
The Federal Reserve’s independence is seen as a safeguard for economic stability, preventing short-term political pressures from overriding long-term economic goals, such as controlling inflation and maintaining stable employment.
Trump, however, has repeatedly asserted that he should be free to voice his opinions on the Fed’s actions. While he has indicated he would allow Powell to complete his term if he continues with what Trump considers “the right thing,” Powell has reiterated that his decisions are rooted in economic, not political, priorities.
