"I'm not concerned that that there's some risk that we would lose our statutory independence because I do think that that those set of ideas are strongly believed by people,” Powell said during an interview at the New York Times’ DealBook summit in New York.
Powell emphasized that the Fed was created by Congress to be independent so it could make decisions for the benefit of Americans and not a particular political party. He stressed that he believes there is "very broad support" for that set of ideas in Congress from Republicans and Democrats.
Then-U.S. President Donald Trump looks on as Jerome Powell, his nominee to lead the Federal Reserve, speaks at the White House in 2017. REUTERS/Carlos Barria/File Photo ·REUTERS / Reuters
President-elect Donald Trump has sent mixed signals on whether he would aim to fire or demote Powell when he reenters the Oval Office next year. Scott Bessent, Trump’s pick to be Treasury secretary, suggested in an interview before being nominated that a "shadow chair" could be appointed to reduce Powell's influence at the Fed.
"Not permitted under the law," the central bank chair said when asked during a press conference.
On Wednesday Powell sounded confident that he can avoid any conflict with the new administration. The Fed chair and the Treasury secretary have breakfast every week for some 75 years, and Powell expects that to continue with Bessent.
"I am confident that I will have the same kind of relationship with him once he's confirmed as I've had with other Treasury secretaries," said Powell.
Scott Bessent, President-elect Donald Trump's nominee to be Treasury secretary. REUTERS/Jonathan Drake/File Photo ·Reuters / Reuters
As for the idea of a so-called "shadow chair" of the Fed, Powell dismissed the possibility.
"I don't think that’s on the table at all," he said Wednesday.
When asked Wednesday whether he was ever pressured by the White House not to raise rates, as Paul Volcker was in the 1980s by the Reagan White House, Powell said "nothing exactly like that happened."
But he acknowledged having clashes with Trump that were aired publicly and didn't change in private settings.
"The president said the same things to me privately as he said publicly," Powell said.
During his first term, then-President Trump attacked Powell with regularity (even though it was Trump who had elevated him to his current role) and openly pushed for the actions he wanted, even once suggesting negative interest rates.
Trump raised the idea of firing Powell publicly in a 2020 news conference when he bluntly said, "I have the right to remove" Powell.
He added that he could also demote Powell from his position as chair, "put him in a regular position, and put somebody else in charge."
It’s an unsettled legal question, though, with many experts falling on Powell's side of the argument.
Federal Reserve Chairman Jerome Powell speaks during the New York Times annual DealBook summit on Wednesday. (Photo by Michael M. Santiago/Getty Images) ·Michael M. Santiago via Getty Images
At issue is Section 10 of the Federal Reserve Act. The law states that each member of the board shall hold office for 14 years "unless sooner removed for cause by the President." The statute doesn't have any language that specifically addresses the chairman of the Board of Governors.
The question that has been debated for years is what exactly constitutes "for cause."
The language in the law is plainly more restrictive for Fed officials when compared with the arrangements of cabinet officials and other members of a presidential administration, who are often described as working "at the pleasure" of the president.
Legal experts have tended to say that a simple policy disagreement wouldn't rise to the level of cause, but it's a standard that hasn't been tested with a judge.
Powell on Wednesday also suggested the Fed could be immune from the cutting block of the forthcoming Department of Government Efficiency, or DOGE, responding that the Fed is “self funded” and has "strong legal independence."
As for the current state of the economy, Powell said is "doing very well" and that the Fed is "still making progress" on inflation.
"The back story is that the US economy is in very good shape and there's no reason for that not to continue."
He didn't suggest what the Fed might do later this month in its final policy meeting of the year. Investors currently expect a small rate cut.
But he did say that because the economy is stronger than the Fed thought earlier in the fall, "we can afford to be a little more cautious."
