Jerome Powell, the Chairman of the U.S. Federal Reserve, has made it abundantly clear that he will not bow to any pressure to resign, even from the newly re-elected President Donald Trump. This statement comes on the heels of the Federal Reserve’s decision to reduce interest rates by a quarter point on Tuesday, the second such rate cut in a row, as inflation continues to show signs of easing. The decision to cut rates comes at a time when the U.S. economy is in a delicate balance between rising inflation and low unemployment.
Trump, who has long been a vocal critic of the Federal Reserve’s actions, especially during his first term, has repeatedly expressed frustration with the Fed’s policies. He has labeled Fed officials as “boneheads” and has openly argued that the Federal Reserve should be more in line with his economic policies. Trump’s remarks have often questioned the independence of the central bank, pushing for a greater role for the president in setting interest rates.
Despite Trump’s criticisms and the fact that the president has at times mused about having more control over Fed decisions, Powell stood firm in his commitment to the role. During a question-and-answer session following the interest rate decision, Powell was asked directly whether he would resign if requested by President Trump. His answer was blunt and unequivocal: “No.”
Powell further emphasized the legal protections afforded to members of the Federal Reserve, specifically pointing out that the president has no authority to demote Fed governors, as such a move would be “not permitted under the law.” This response was a clear assertion of the Fed’s independence, which is enshrined in U.S. law and was a key reason for the creation of the central bank in the early 20th century.
The interest rate reduction announced on Tuesday is part of the Fed’s ongoing efforts to manage inflation, which has been a key issue for the U.S. economy. Inflation surged to a 40-year high during 2022, reaching 9.1%, but recent economic data suggests that inflationary pressures are starting to ease. The Federal Reserve had previously raised rates to combat this runaway inflation, but as inflation has begun to decline—falling to 2.1% in the personal consumption expenditure (PCE) index—there has been more room to ease rates. Powell noted that the current rate range is now between 4.5% and 4.75%, down from a peak of 5.25%-5.5%.
While Powell acknowledges that the Fed has made progress, he is cautious about declaring victory, noting that there is still work to be done. He explained that the Fed has “gained confidence that we’re on a sustainable path” to reach its inflation target of 2%, but he emphasized that the job is not yet finished. This statement reflects the Fed’s dual mandate to ensure both price stability and full employment, which can sometimes pull in opposite directions.
Despite Powell’s clear and firm stance on maintaining the Fed’s independence, there is still lingering concern about what a second Trump term might mean for the central bank. The president has repeatedly made it clear that he disagrees with the Fed’s approach, especially its decision to raise rates during his first term. Trump’s campaign speeches often suggested that he believed he should have more influence over the central bank’s decisions, arguing that his economic instincts were more accurate than those of the professional economists at the Fed.
While Powell has been critical of Trump’s comments in the past, he has largely refrained from publicly addressing the president’s criticisms, sticking to the Fed’s core policy-making functions. However, with Trump’s return to the White House, there are new questions about how the relationship between the two men will evolve, especially given the president’s renewed focus on inflation as a major issue during his re-election campaign. Powell remains steadfast in his commitment to maintaining the Fed’s independence from political pressure, regardless of who occupies the White House.
In the context of these ongoing tensions, Powell’s current term as Fed chair, which began in 2022 and runs through 2026, remains a subject of scrutiny. Powell’s second term, confirmed during Trump’s first presidency, could be marked by even greater scrutiny, particularly if Trump seeks to reshape the Federal Reserve to align more closely with his economic goals. Nonetheless, Powell’s statement that he would not step down shows his determination to maintain the Fed’s longstanding independence in the face of political pressure.
