President-Elect Trump Weighs Powell’s Future as Fed Chair Amid Tensions Over Economic Policy

Among many private conversations between President-Elect Trump and his advisors, some of them are better not to be disclosed in public. This was made evident by a senior advisor who happens to be quite close to the President-elect, Trump.

On a request to keep anonymity, he divulged that the newly elected President Trump is expected to allow Federal Reserve Chair Jerome Powell to continue his job till the end of the expected term which happens to expire in May 2026. Trump had earlier remarked, “I would let him serve it out especially if I thought he was doing the right thing.”

Retaining Powell by President-Elect Linked to Central Bank Policy

This became evident earlier too, when in July, a leading Business media was told by the President-elect about the latter`s intention to extend Powell`s term for five years. Trump`s economic team shares the view with the senior adviser that owing to the Central Bank`s policy of cutting down the interest rates, the Federal Reserve Chair Powell should be retained in the top post. However, the adviser shared his concern about a possible change of President-elect`s mind.

Powell`s belief in the law of the nation was seen when he replied in naught, upon being asked by the press about his possible firing off by Trump. “Not permitted under the law,” his confident reply. The Fed post served till date diligently by him is coming to an end soon. Earlier, Powell on Thursday post-election conference, that being his first one, was shot with queries regarding the fate of his top job should Trump ask him to quit that.

The efficiency of Powell, a Republican former private equity executive was noticed by President Joe Biden when he re-appointed him for a second four-year term. In the year 2018, Trump appointed him for the top slot while Powell earlier served on the central bank’s governing board.

Economic policy director, Gary Cohn, a former Goldman Sachs alum might not be able to get the slot as he is being seen as a protestor against steel tariffs. The President-elect had got the tariffs going on during his first term.

Clash Between Powell and President-Elect Trump Over Policies

An earlier stint of five-year Presidentship had brought Powell and Trump at loggerheads over certain policy decisions by the Bank. This is why, Trump might be considering the names of Kevin Warsh, who had been serving on the bank’s board of governors and Kevin Hassett, as Trump’s former chief economist.

As stated above, Trump has shown his displeasure with Jerome Powell and his functioning in the past and even occasionally gave a hint that he may remove him from the Fed Chair post. This came as a surprise to many, as none of the previous presidents had even taken such a decision.

However, the justification provided by Trump for this imminent decision was, that some issues were making him skeptical about Powell. To be more precise, the deliberations by the Fed Chair were mostly held in closed offices and the related notes were released after a considerable amount of time had passed, thus rendering them obsolete.

Regarding this, a media agency had reported that Trump wanted the timely release of the minutes resulting from any such discussions and also that the meetings should always be held under camera surveillance.

This year in July, Powell was quite optimistic about continuing to work for the office of Fed Chair, when he was thrown a question about the same. Earlier also, both Trump and Powell had a confrontation during the first term of the latter, with Trump many times threatening to remove him.

Trump upset over some bad decisions by Fed Chair Powell

A legal caveat comes though with the step, should President-Elect Trump consider going ahead with it, that is, a President can`t remove a Fed chair, until and unless, the law is broken. “He has, so far, made a lot of bad decisions, in my opinion,” is what Trump told the reporters when markets crashed down way back in March 2020 due to Covid. (I have a) “right to remove (Powell) as chairman,” he told the reporters then.

In what appears to be a professional tussle over the matters, Trump seemed to trivialize the status of the Fed chief at an event hosted by the Economic Club of Chicago. “You show up to the office once a month and you say, ‘Let’s flip a coin,’ and everybody talks about you like you’re a god,” saying earlier that the post carried with it an ease, hitherto unheard in other government jobs.

It is often said that at every monetary policy meeting, the presence of 11 other Fed officials is a must, who decide about the interest rates. Even if the present Fed chair carries an influence in his professional circles, these officials balance the decisions taken at any Federal Open Market Committee meetings.

That pressure probably, is seen as the reason behind the Fed chair`s lowering of the rates at President-Elect Trump`s insistence. The President in his first term, was very keen to remove Powell because the latter was keeping the rates too high.