Federal Reserve Chair Jerome Powell expressed confidence in the central bank’s continued independence under a potential second Trump administration. He also anticipates a productive working relationship with Scott Bessent, President-elect Trump’s nominee for Treasury Secretary. Powell addressed these topics during an interview at the New York Times’ DealBook summit in New York.
Powell reiterated his belief in the Fed’s congressionally mandated independence, emphasizing its importance in making decisions for the benefit of all Americans, regardless of political affiliation. He highlighted the broad bipartisan support for this independence within Congress. This marks the third time since the November election that Powell has publicly addressed his future under a new presidential administration.
President-elect Trump has given conflicting signals regarding his intentions towards Powell’s position upon returning to office. Before his nomination, Bessent suggested the possibility of appointing a “shadow chair” to potentially diminish Powell’s influence within the Fed. However, Powell firmly stated his intention to complete his term as chair, which extends to 2026. He previously asserted that even if President Trump attempted to remove him, it would be legally prohibited.
Powell expressed confidence in maintaining a collaborative relationship with Bessent, similar to his interactions with previous Treasury secretaries, citing the long-standing tradition of weekly breakfasts between the two positions. He also dismissed the notion of a “shadow chair” as unlikely.
Addressing past interactions with the White House, Powell denied experiencing direct pressure to avoid raising rates, unlike Paul Volcker’s experience with the Reagan administration in the 1980s. He did acknowledge public disagreements with President Trump, confirming that these disagreements were consistent in private conversations. During his first term, President Trump frequently criticized Powell, despite appointing him, and publicly advocated for specific policy actions, including negative interest rates. He even publicly contemplated firing or demoting Powell. The legality of such actions remains a point of contention, with legal experts largely siding with Powell.
Section 10 of the Federal Reserve Act outlines the 14-year term for board members, subject to removal “for cause” by the President. However, the statute lacks specific language regarding the chairman’s position. The definition of “for cause” remains a subject of legal debate. Experts generally agree that policy disagreements alone wouldn’t justify removal.
Powell also suggested the Fed’s self-funded status and legal independence might shield it from potential cuts proposed by the forthcoming Department of Government Efficiency. He expressed optimism about the current economic landscape, noting its strength and the Fed’s continued progress on inflation. He refrained from speculating on the Fed’s potential actions in its final policy meeting of the year, where investors anticipate a minor rate cut. However, he indicated that the economy’s stronger-than-expected performance allows for a more cautious approach.
In conclusion, Powell remains confident in the Fed’s independence and its ability to navigate the economic landscape under a potential second Trump administration. His focus remains on fulfilling the Fed’s mandate and maintaining a productive working relationship with the Treasury Department.
