Federal Reserve Chairman Jerome Powell didn’t flinch when asked if he would step down if President-elect Donald Trump told him to resign. His answer was clear and firm: “No.”
The exchange took place shortly after the Fed’s decision to deliver a second consecutive interest rate cut, underscoring Powell’s stance on the central bank's independence.
Trump has criticized Powell repeatedly, particularly over his decisions not to slash interest rates to the levels Trump wanted during his first term. Trump had appointed Powell in 2018, replacing Janet Yellen. Ironically, President Joe Biden chose to retain Powell in 2021, with his current term set to expire in May 2026. Later on, another reporter asked Powell if the president had the power to fire or demote him from his position. The Fed chair responded that such an action was “not permitted under the law.”
While Trump’s stance on the Fed remains contentious, Powell made it clear he won’t be influenced by politics. “What Powell is saying, in making the forceful statement that no one can be demoted, is that the Fed’s leadership is all in this together,” said Peter Conti-Brown, a professor and Fed historian at the Wharton School. “I see this as Powell’s declaration that the president-elect is going to have his say on shaping the Federal Reserve, but not until there are vacancies to be filled.”
Powell’s insistence on independence comes as he sidestepped other politically-charged questions, but he was unwavering on the Fed’s autonomy. "He's a firm believer in the importance of Fed independence, and quitting voluntarily due to criticism from a president would show that the Fed isn’t independent,” noted Ian Katz, managing director at Capital Alpha Partners.
This debate hints at a potential power struggle between the central bank and a president who believes he should have a say in interest-rate policy. Despite Trump’s initial support of Powell, he quickly turned to pressure him to stop raising rates, creating a longstanding public feud.
Powell, known as a staunch institutionalist, has repeatedly emphasized the central bank's autonomy. He sees serving his full term as integral to that principle. Trump, meanwhile, has recently softened his more direct critiques of the Fed's independence, even saying he’ll let Powell finish his term. But he hasn’t abandoned the idea that a president should have some influence on policy.
The tension could extend to other Fed leadership roles. One potential target is Vice Chair for Supervision Michael Barr, whom Republicans have often criticized. Republican Senator Bill Hagerty, a leading contender for Trump’s cabinet, recently suggested “everything should be on the table” regarding Barr’s position.
While the president’s legal authority over the Fed chair remains debatable, any attempt to demote Powell or his colleagues would likely trigger a courtroom showdown. Legal experts say there may be a pathway for altering the vice chair’s role, but for now, Powell seems firmly at the helm, ready to defend the Fed’s independence in uncertain times.