- Federal Reserve chair Jerome Powell was once again clear he did not believe the president has the ability to interfere in the central bank. Over the years, Trump has regularly expressed frustration with Powell over his monetary policy.
Federal Reserve Chair Jerome Powell reiterated that he doesn’t believe the president of the United States has the authority to fire members of the Federal Reserve Board.
On Tuesday, during testimony before the Senate Banking Committee, Powell dismissed the possibility that President Donald Trump might have the authority to remove any of the central bank’s board members.
In the hearing, Sen. Jack Reed (D-R.I.) mentioned Trump had recently dismissed several members of the board of the Kennedy Center, with the intent to appoint himself as chair. Reed then asked Powell what he would do “if the president tried to remove a member of the Federal Reserve Board.”
Powell replied: “Well, it’s pretty clearly not allowed under the law.”
Trump has been critical of the Fed and Powell since his first term in office. On more than one occasion, Trump has criticized Powell’s decision-making as Fed chair. Since first appointing him in 2018, Trump has been angry with Powell for lowering interest rates, raising interest rates, and keeping them steady.
After the Federal Open Markets Committee decided not to cut interest rates at its January meeting, Trump raged against the central bank in a social media post. He accused the Fed of “fail[ing] to stop the problem they created with inflation.” In the lead-up to the meeting, Trump had said he “demanded” interest rates come down “immediately.”
In the hearing, Powell said the Fed was in no rush to cut interest rates because the economy had stabilized. He added that inflation, while still above the Fed’s 2% target, was at 2.6%, and that the labor market was cooling without plummeting, with the unemployment rate at 4%.
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Powell said.
Last month, just a few days into his current term, Trump said he believed he knew more than Powell about monetary policy.
“I think I know interest rates much better than they do, and I think I know it certainly much better than the one who’s primarily in charge of making that decision,” Trump told reporters in the Oval Office in January.
Last year, Trump said if he were elected, he would not reappoint Powell as Fed chair. In that interview, Trump accused Powell of being “political” and lowering interest rates “for the sake of maybe getting people elected.” At the time, the Federal Reserve had been in a rate-cutting cycle as inflation had started to come down.
Trump and his advisors have taken issue with the notion of the Federal Reserve’s independence. They believe the Fed should take into consideration the views of the White House. Past presidents have always stayed out of intervening in monetary policy in order to insulate the central bank from political jockeying—the belief being that only the markets should dictate the Fed’s decisions.
During the presidential campaign, Trump allies were reportedly working on a plan to put their views in action should he win the election. The Wall Street Journal reported a small group of allies had put together a 10-page document detailing a set of proposals that would curtail the Fed’s independence. Some of the options considered included having the president consult on interest-rate decisions and using the Treasury Department, which is part of the executive branch, to limit the Fed’s influence.
