Federal Reserve Chairman says Trump can't fire him

The Federal Reserve chief has dismissed speculation that his job 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 to do so and that it was “not permitted by law” for the White House to force him to resign.

Mr. Powell answered questions from reporters at a news conference after the bank announced a cut in borrowing costs and cut the Fed's key interest rate to between 4.5% and 4.75%.

Forecasters expect borrowing costs to fall further in the coming months, but warned that Trump's plans for tax cuts, immigration and tariffs could keep pressure on inflation and drive up the national debt, complicating those bets.

Trump has pledged to impose import tariffs of at least 10% on all goods entering the country. According to economists, these costs would be passed on to consumers and thus drive up prices.

Tax cuts could also spur inflation by encouraging spending, while Trump's proposed mass deportations of immigrants would create a big hole in the U.S. workforce, which could drive up wages.

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

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

“It's such an early stage – we don't know what the guidelines are, we don't know when they will be implemented,” he said. “In the short term, the election will have no impact on our political decisions.”

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

During his first term, Mr. Trump called bank officials “blocks” on social media and reportedly questioned advisers about whether he could fire Mr. Powell.

This year, US media have reported that Trump allies have been looking at ways for the White House to gain more control over the Fed, including potentially sidelining Mr Powell by naming his successor early.

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

However, Powell said Thursday that he would not resign on Trump's orders and that an attempt to oust him before his term ends is “not permitted by law.”

Mr Powell has faced intense scrutiny in recent years as prices began to rise in 2022.

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

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

In September, the Fed began to reverse course, cutting interest rates by 0.5 percentage points more than usual. She said she was confident that the pace of price increases in the US was stabilizing.

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

The cut announced Thursday was widely expected and unanimous, marked the second consecutive decline, Lower rates 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 about rising unemployment emerged at the start of the year, they faded in September after data showed a larger-than-expected increase in hiring.

But the latest figures showed there was little job growth in October, as the country grappled with hurricanes and strike action.

Mr. Powell said officials expect to cut rates further, but how quickly and to what extent remains to be seen. He resisted questions that sought more precise guidance.

“We don't think it's a good time to produce much more guidance – there is considerable uncertainty,” he said. “It’s about finding the right pace and the right goal.”

Whitney Watson, co-chief investment officer of fixed income at Goldman Sachs Asset Management, said her firm expects another rate cut in December but acknowledged questions about the path forward.

“Stronger data and uncertainty over fiscal and trade policy mean rising risks that the Fed could choose to slow the pace of easing,” she said, noting that the central bank could begin cutting interest rates next year “to leave out”.

The Fed's decision came on the same day that the Bank of England warned that it could take longer for borrowing costs to fall and warned that inflation could rise further after last week's budget release.

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

“In the US, interest rates look set to stay higher for longer as the Fed needs to tread very carefully until it can better assess the true impact of Trump’s plans.”