In a bold statement on Thursday, Jerome Powell, Chairman of the United States Federal Reserve, shot down speculation about his position in light of Donald Trump’s impending return to power.
The Federal Reserve chief, appointed by Trump in 2017, responded firmly to questions regarding the potential for his removal.
Photo credit: Kent Nishimura
Source: Getty Images
Powell made it clear that no one, including Trump, can sack him from his role before his term ends in 2026.
“I will not step down if asked,” Powell said in response to media inquiries during a press conference where the Federal Reserve announced a reduction in borrowing costs. “It is not permitted under law for the White House to force me out.”
A New Chapter in the Trump-Powell Relationship
Powell’s remarks come amid growing concerns that Trump, once critical of Powell, may try to assert more control over the central bank if he wins re-election in 2024. During his first term, Trump frequently criticized Powell’s decisions, especially the Fed’s interest rate hikes. The former president even pondered whether he had the authority to dismiss Powell, calling Federal Reserve officials “boneheads” in tweets.
This time, Powell’s stance is clear. The Federal Reserve operates independently from the executive branch, and attempts to remove him or influence monetary policy are constrained by law. Despite Trump’s repeated verbal assaults on the Fed’s monetary policy, Powell has emphasized that the central bank remains committed to its mandate of maintaining price stability and a healthy job market, irrespective of political pressures.
Fed’s Monetary Policy Amid Trump’s Plans
Powell’s comments on his independence come at a critical time for the U.S. economy. The Federal Reserve recently announced a cut to its key lending rate, lowering it to a range of 4.5% to 4.75%, marking the second reduction in a row. This decision was largely in response to the slowdown in inflation, with figures dropping to 2.4% in September from a peak of over 9% in mid-2022. However, Powell expressed caution about the future, given the uncertainty surrounding Trump’s proposed policies.
Trump’s plans, including massive tax cuts, a 10% tariff on all imports, and a crackdown on immigration, could exert significant pressure on inflation and increase government borrowing, complicating future economic predictions. Powell remarked, “It’s too early to tell how the new administration’s policies will affect the economy, but in the near term, the election will have no effects on our policy decisions.”
Economists have warned that Trump’s tax cuts could fuel consumer demand, potentially stoking inflation further. Additionally, his proposed immigration reforms could lead to a shrinking workforce, putting upward pressure on wages.
A Delicate Balance Ahead for the Fed
While Powell is confident in the Federal Reserve’s legal protections, the central bank faces growing pressure as it attempts to navigate uncertain waters. Interest rates on U.S. debt have already spiked due to concerns about rising government borrowing in the face of Trump’s policies.
As the Federal Reserve moves forward, Powell emphasized the importance of keeping rates balanced to avoid stoking inflation or harming economic recovery. While job growth has been solid, recent figures from October showed little job growth, with natural disasters and labor strikes contributing to the slow-down. The Fed, Powell noted, will continue to assess the economy and adjust rates cautiously, depending on future developments.
“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, signaling that the central bank will tread carefully in the months ahead.
Uncertainty Remains: What Lies Ahead?
Despite the drop in rates, uncertainty remains about how quickly the Fed will continue to ease monetary policy. Goldman Sachs’ Whitney Watson suggested the firm expected another rate cut in December, but cautioned that the Fed might slow the pace of easing if fiscal and trade policies under Trump’s administration create more instability.
Lindsay James, an investment strategist at Quilter Investors, echoed these concerns, noting that interest rates may remain higher for longer as the Fed assesses the impact of Trump’s proposed policies. “On both sides of the pond, expectations for future rate cuts are being scaled back,” James said.
In the coming months, it will be crucial for Powell and the Fed to navigate these challenges while maintaining independence from political pressures. With Trump likely to push forward with his controversial policies, Powell’s leadership will be tested like never before.
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Source: Legit.ng