Over the years, President-elect Donald Trump has sent a confusing message to either demote or fire the Federal Reserve chair Jerome Powell when he comes back for the second term.
Powell, on the other hand, was confident that Trump could not remove him from the chair even if he wanted to.
Powell responded to reporters asking for his opinion on Thursday about the legality of Trump’s plan that the dismissal of the chair or any high-rank Fed official is not permitted by the law.
He also affirmed that he would not leave his position at one point during the press conference.
This could be a point of contention for many months ahead, although Trump may have hinted that he may decide to not fire Powell, he insists that he does have the authority.
In 2020, Trump stated at a press conference that he could remove Powell from the chair and get someone else to replace him, while Powell would be demoted to a regular position instead.
The conflict between the two has sparked some disconcerting legal debate, with many experts siding with Powell in the argument.
In Section 10 of the Federal Reserve Act. The law states that the board member shall hold office for 14 years “unless sooner removed for cause by the President.”, though it does not specify whether it would also affect the Fed chair or not.
Powell’s comment on Trump’s intention and the legal question that followed originate from the central bank’s concern after Trump was declared a victor during the Tuesday election.
In his first term, Trump consistently criticized Powell (whom Trump himself put in charge) and blatantly tried to assert himself and push the central bank to do what he wanted. At one point he even suggested negative interest rates.
The former president of the Kansas City Fed, Esther George has given remarks in an interview on Thursday afternoon that Trump may possibly try to meddle with the monetary policy.
She also added that in the coming years, the Fed will need to stand up against pressure from Trump, whether it would be a simple rhetoric or a direct threat, but she also assured that the Fed is ready and well prepared to focus on its own mandate.
During his campaign, Trump has sent a mixed message on how far he will go to snuff out the Fed’s independence.
That message still maintains its course, as CNN reported on Thursday, Trump’s senior advisor said that he would allow Powell to serve the remainder of his term that would end in May 2026. But after that, Trump is set to choose Powell’s replacement immediately and would not offer Powell a third term.
Powell said on Thursday that the Fed’s monetary policy would see no immediate change ahead of any policy change that would come under the Trump presidency.
