Fed Chairman Powell says he won't resign even if Trump asks him to

Nov 7 (Reuters) – U.S. Federal Reserve Chairman Jerome Powell said on Thursday he would refuse to leave office early if new President Donald Trump tried to oust him, adding that he cannot be legally removed anyway.

Powell spoke after the Fed met expectations and cut its interest rate target range by a quarter of a percentage point to 4.5% to 4.75%, as officials continue to normalize monetary policy amid easing inflation pressures.

Ahead of the US national election on Tuesday, it was widely expected that the Fed would press ahead with rate cuts.

Powell on Thursday dismissed numerous questions about what Trump's stated policy goals could mean for central bank decision-making. “In the short term, the election will have no impact on our policy decisions,” Powell said, adding: “We are not guessing, speculating or assuming what the administration broadly might do.”

CNN reported that Trump is considering either former Fed Governor Kevin Warsh, now a persistent critic of the central bank, and his former chief economist Kevin Hassett as possible successors to Powell.

SOUR RELATIONSHIP

Trump appointed Powell as Fed chair in early 2018 to replace Janet Yellen, who later became President Joe Biden's Treasury secretary. Biden reappointed Powell for his current term.

But the relationship between Trump and Powell soured as Trump frequently attacked the Fed and its chief over the central bank's policy decisions during his first term, even as policymakers routinely ignored the harsh words. Trump's attacks on the Fed were the reason presidents for decades steered clear of direct criticism of the central bank, which operates with legal independence under congressional oversight.

Any attempt to force a Fed chief out of office, even if unsuccessful, would likely be received very negatively by financial markets and would also likely fuel fears of rising price pressures.

At the same time, Trump's self-described high and expansionary trade tariffs and massive deportations of undocumented immigrants are likely to reignite the inflationary fire that the central bank has successfully mitigated.

If Trump's policies create this reality, it could prevent the Fed from cutting rates as much as it otherwise would have expected and could even force the central bank to raise rates. To some observers, this suggests that the Fed and Trump could be on a collision course.

But for now, the Fed has some breathing room. “President-elect Trump will likely pressure the Fed to cut interest rates more aggressively, as he did in his first term, but at least next year this will have little impact on the trajectory of interest rates because the Fed system is structured this way. “To protect interest rate decisions from pressure from the White House,” said Bill Adams, chief economist at Comerica Bank.

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