US Fed chief says Trump can’t fire him

The head of the US Federal Reserve has hit back at speculation that his position could be in jeopardy as Donald Trump prepares to take power in Washington.

Federal Reserve Chairman Jerome Powell said he would not resign if Trump asked and that it is “not permitted under the law” for the White House to force him out.

Mr. Powell was answering questions from reporters at a news conference after the bank announced a cut in borrowing costs, lowering the Fed’s key lending rate to a range of 4.5%-4.75%.

Forecasters have expected borrowing costs to fall further in coming months, but warned that Trump’s plans for tax cuts, immigration and tariffs could keep pressure on inflation and drive up government borrowing, complicating those bets.

Trump has promised to impose import duties of at least 10% on all goods entering the country, costs that economists say will be passed on to consumers, helping to drive up prices.

Tax cuts could also stimulate inflation by encouraging consumption, while the mass deportations of immigrants proposed by Trump would create a large gap in the US workforce that could drive up wages.

Interest rates on US debt have already risen this week, reflecting these concerns.

Mr. Powell said Thursday it was too early to say how the new administration’s agenda might affect the U.S. economy – or how the Fed should respond.

“It’s such an early stage – we don’t know what the policies are, we don’t know when they’re going to be implemented,” he said. “In the short term, the election will have no effect on our policy decisions.”

Mr. Powell was appointed to chair the Fed by Trump in 2017, but later became a frequent target of his criticism.

During his first term, Trump called bank officials “boneheads” on social media and reportedly consulted advisers on whether to fire Mr. Powell.

This year, US media have reported that Trump allies have been looking at ways for the White House to assert more control over the Fed, including potentially putting Mr. Powell sidelined by prematurely naming his replacement.

Trump has repeatedly said he believes he has the right to express his views on Fed actions. He told Bloomberg over the summer that he would let Powell serve out his term, which ends in 2026, “especially if I thought he was doing the right thing.”

However, Powell said Thursday that he would not step down if Trump ordered it and that an attempt to oust him before his term ends is “not permitted under the law.”

Mr. Powell has faced heavy scrutiny over the past few years as prices began to rise in 2022.

The bank responded by raising interest rates quickly that year, ultimately raising them from near zero to around 5.3% in July – the highest rate in more than two decades.

These increases affected the public in the form of higher borrowing costs for credit cards, mortgages and other loans, help fuel discontent over higher living costs, particularly for housing, which played a role in the election.

The Fed began reversing course in September, cutting interest rates by 0.5 percentage point more than usual, saying it was confident the pace of U.S. price increases was stabilizing.

US inflation stood at 2.4% in September, down from more than 9% in June 2022, according to the latest official figures.

The cut announced Thursday, which was widely expected and unanimously marked the second fall in a row, lower the interest rate by a further 0.25 percentage points.

Mr. Powell said Thursday that officials remained equally focused on keeping prices stable and the labor market healthy.

Although concerns flared earlier this year about rising unemployment, they subsided in September after data showed an unexpectedly strong hiring surge.

However, the latest figures showed almost non-existent job growth in October as the country struggled with hurricanes and strike action.

Mr. Powell said officials expected to continue cutting interest rates, but how fast and how far remains to be seen. He resisted questions that sought more precise guidance.

“We don’t think it’s a good time to do a lot of additional guidance – there’s a lot of uncertainty,” he said. “The point is to find the right pace and destination as we go.”

Whitney Watson, co-chief investment officer of fixed income at Goldman Sachs Asset Management, said her firm expected to see another rate cut in December, but acknowledged questions about the road ahead.

“Stronger data and uncertainty about fiscal and trade policies mean increasing risks that the Fed may choose to slow the pace of easing,” she said, noting that the central bank may begin “skipping” rate cuts next year.

The decision by the Fed came on the same day that the Bank of England warned that borrowing costs could take longer to fall and warned that inflation could creep higher after last week’s Budget.

“On both sides of the pond, we are seeing expectations for future rate cuts being reduced significantly compared to what many had originally hoped for,” said Lindsay James, investment strategist at Quilter Investors.

“In the US, interest rates look set to remain higher for longer as the Fed will have to tread very carefully until it is better able to assess the true impact of Trump’s plans.”