Bloomberg News

WASHINGTON — Federal Reserve Chairman Jerome Powell said he and other central bank officials cannot be ousted or demoted by the president without cause.

At his post-Federal Open Market Committee press conference, Powell had a concise answer when asked if he would give in to pressure from the new administration to resign: “No.”

Powell faced an avalanche of questions about That of President-elect Donald Trump policy agenda as well as his personal experience with the former and future resident of the White House. Powell has largely declined to comment on anything related to this week’s presidential election or its potential implications for monetary policy.

The Fed chairman, however, did not hesitate when asked whether the president could remove or demote at will – from chairman or vice chairman to a standard board seat – a member of the Board of Governors of the Federal Reserve.

“It’s not allowed by law,” Powell said flatly.

Powell’s comment comes amid reports that Trump’s transition team would like to shake up the Fed’s governing body by elevating or appointing board members more aligned with the president’s policy preferences. That includes Powell and Vice Chairman for Supervision Michael Barr, the Fed’s top regulatory policymaker.

Under the Banking Act of 1935, Fed governors can only be removed from office for cause, i.e., for inefficiency, neglect of duty, or malfeasance – a key guarantee for political independence of the Fed. But the law makes no mention of removing the president or vice president designations, nor does the Dodd-Frank Act of 2010, which created the vice president for an oversight position.

This ambiguity leaves the door open for Trump to try to strip Powell and Barr of their titles, but could also lead to a high-stakes legal battle between the White House and the central bank.

Powell’s presidency expires in 2026, as does Barr’s term as vice president. Both officials would be eligible to remain on the board after their leadership positions expire, with Powell’s underlying seat expiring in 2028 and Barr’s in 2032.

In the short term, Powell said the outcome of this week’s presidential election would have “no effect” on Fed policy.

Although political and economic analysts worry about the monetary policy implications of Trump’s proposals for universal tariffs and lower taxes, Powell said it is too early to know what those proposals might look like in the future. practical.

“We don’t know what the timing and substance of any policy changes will be,” Powell said. “So we don’t know what the effects on the economy might be, particularly whether and to what extent these policies would be important for achieving our goals of maximum employment and price stability. We’re not guessing. We’re not guessing. don’t know how to speculate.”

During today’s meeting, the FOMC lowered its benchmark interest rate by a quarter of a percentage point. It was the second consecutive meeting in which the committee eased monetary policy, following the group’s half-point cut in September.

Going forward, Powell said the FOMC would act “cautiously” in its pursuit of a neutral rate – one that neither stimulates nor suppresses demand. In doing so, he added, the commission will be careful not to move so slowly that it hurts the job market, nor so quickly that inflation could soar again.

“We’re trying to balance the risk of moving too quickly and perhaps undermining our progress on inflation, or moving too slowly and letting the labor market weaken too much,” he said. Powell. “We’re trying to be on the middle path, where we can maintain the strength of the labor market while allowing further progress on inflation. We think that’s where we are, but that’s the question we will ask in December) and at other meetings.

The next and final FOMC meeting in 2024 will take place on December 17-18.