Jerome Powell Ready to Battle in Court if Trump Fired Him as Fed Chief, 2018 Report Reveals

In 2018, Powell was prepared to take legal action if then-President Donald Trump attempted to dismiss him, according to sources cited by the Wall Street Journal.

Now, with Trump expected to return to the presidency shortly, their previous interactions could influence future conflicts.

Trump initially appointed Powell as Fed Chair in 2018 during his first presidency. However, tensions arose when Powell resisted Trump’s requests for more lenient monetary policies.

At that time, Powell, signaling his readiness to contest his removal, informed then-Treasury Secretary Steven Mnuchin that he would challenge any dismissal, even if it meant bearing the legal costs personally, the Journal reported.

A representative from the Fed chose not to comment on the matter. While Trump’s transition team did not directly respond to the report, they noted that decisions regarding his second administration were forthcoming. Nonetheless, the Journal highlighted that Trump had admitted considering firing Powell during his first term.

“I was threatening to terminate him,” Trump revealed at a gathering at the Economic Club of Chicago. “It was uncertain whether that was even possible.”

Recently, during a press conference following a decision by the Fed to lower interest rates, Powell was questioned about resigning if Trump demanded it. He firmly responded, “no.” When asked whether he believed a president had the authority to dismiss or demote a Fed chair or other officials, Powell maintained, “Not permitted under the law.”

This statement led Senator Mike Lee from Utah to express on social media platform X, “The Executive Branch should follow the president’s lead. This was the original intent of the Constitution. The Federal Reserve serves as a prime example of our deviation from this design. This is yet another reason to #EndTheFed.”

Elon Musk, anticipated to play a role in Trump’s administration, echoed this sentiment by sharing the post with an emoji symbolizing strong agreement.

Economists argue that the independence of the Fed is crucial for formulating monetary policy free from political pressures, which is essential for maintaining its credibility in managing inflation.

Currently, Trump and Powell seem to agree on the necessity for lower rates. However, this alignment might shift, possibly by early 2025, potentially leading to another conflict.

Although further rate cuts are anticipated in December, some analysts believe that persistent inflation or a robustly growing economy could prompt policymakers to reconsider additional reductions.

Trump has recently suggested he would handle monetary policy better than Powell, who has backgrounds in investment banking and the Treasury Department, and voiced a desire to have some influence.

“I believe the president should have at least some input,” Trump stated in August. “In my case, I’ve been very successful financially, and I feel my instincts are often better than those of people who might be at the Federal Reserve or its chairman.”

While Trump also mentioned to Bloomberg in June that he would allow Powell to complete his term, he seemed to imply conditions. “I would let him serve it out, especially if I think he’s doing the right thing.”

Powell’s term as chair is set to end in May 2026, and his role as a Fed governor until January 2028.

In 2019, Powell firmly declared in both public and private that he would not be ousted by any president. During a congressional hearing, when asked if he would step down if directed, he answered, “no.”

Furthermore, according to the Journal, Powell assured a visitor that year, “I will never, ever, ever leave this job voluntarily until my term is up, under any circumstances whatsoever. Not even death could make me consider quitting prematurely.”

Meanwhile, Scott Bessent, a potential Treasury secretary for Trump and an economic advisor, suggested appointing a “shadow Fed Chair” early might render Powell a lame duck with diminished influence.

Despite initial support for this idea, Bessent later defended its potential to enhance the Fed’s credibility following criticisms, as reported by Forbes. His investment firm Key Square did not respond immediately to a comment request.

The Fed has not always been independent. It was after President Richard Nixon influenced Fed Chairman Arthur Burns to loosen monetary policies before the 1972 election that the norm of independence took hold, proving crucial as the Fed later aggressively raised rates to combat inflation in the 1970s and 1980s.

Regarding dismissal, the Federal Reserve Act specifies that a board member can only be removed “for cause,” without directly addressing the removal of the Fed Chair, who is also considered a board member.

If Trump attempts to fire Powell before his term ends, the matter could potentially reach the Supreme Court, explained financial historian and legal scholar Peter Conti-Brown of the Brookings Institution to Fortune.

However, with a cooperative Congress possibly under full Republican control, Trump might have the opportunity to amend the law.