Federal Reserve Chair Jerome Powell says won't resign if pressured by Trump after interest rate cuts

US Federal Reserve Chair Jerome Powell said that he would not resign if he faced any pressure from the new President-elect Donald Trump after the central bank lowered interest rates by a quarter-point on Thursday afternoon. Trump has been an ardent critic of the federal body and its independence.

The former president, who clinched the victory in 2024 called fed officials “boneheads,” the last time he was in power. Trump even went on to state that he himself should have a role in setting interest rates. When questioned about Trump’s apprehension and whether he would step down if Trump asked him to leave the role, Powell delivered a blunt “no”.

The fed chair made it clear that the White House demoting the body’s governor from their leadership is “not permitted under the law”. The remarks from Powell came after he lowered interest rates by a quarter point.

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‘Central bank has gained confidence’: Powell

It is pertinent to note that the federal interest rates in the country have been lowered for the second time in the year 2024. The decline in the rates indicated that inflation was easing before Trump assumes office in January. Rates now stand at 4.5 per cent to 4.75 per cent, down from a decades-high level of 5.25 per cent to 5.5 per cent.

It was in September when the Federal Reserve lowered interest rates for the first time since 2020. According to The Guardian, the personal consumption expenditure (PCE) price index, a closely watched measure of inflation, dropped to 2.1 per cent last month. Meanwhile, the US Consumer Price Index (CPI) was 2.4 per cent in September, the lowest it has been in three years.

During the Thursday press briefing, Powell said that the central bank had “gained confidence that we’re on a sustainable path down to 2 per cent” but added, “The job’s not done.”

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The significance of a decrease in interest rates

It is pertinent to note that the interest rate is the Fed’s main tool in carrying out its “dual mandate,” i.e. balancing price increases with the labour market. A decrease in interest rates would mean that borrowing will get cheaper. In August, a month before the central bank first lowered rates, Trump criticised the move. “It’s something they know they shouldn’t be doing,” Trump said at that time.

During his campaign trail, the former reality TV star suggested that he would intervene if he disagreed with the central bank, which historically has acted independently from the White House. Powell’s current term as the Reserve chair, his second since he was first appointed by Trump in 2018, will end in May 2026.

In August, Trump said that he would “let him serve it out”. “Especially if I thought he was doing the right thing,” he asserted. However, Trump has also suggested that he should have a say in the decisions made by the Federal Reserves.

“I feel that the president should have at least a say in there," Trump said at a press conference in August. “I made a lot of money. I was very successful. And I think I have a better instinct than, in many cases, people that would be on the Federal Reserve – or the chairman," he added.

While giving his take on the 2024 US election result, Powell maintained that the outcome does not impact any Fed policy decisions in the short term. “We don’t know what the timing and substance of any policy changes will be. We therefore don’t know what the effects on the economy would be,” Powell said. “We don’t guess, we don’t speculate, and we don’t assume.” The next meeting of the Federal Reserve is scheduled to take place on December 10 and 11.

With inputs from agencies.