Jerome Powell was ready to fight any Trump overthrow in 2018

He said in 2018 that he would go to court if then-President Donald Trump tried to fire him, sources said Wall Street Journal.

With Trump now the president-elect and set to return to the White House in a few months, their shared history could impact how future disagreements play out.

During his first term as president, Trump appointed Powell as Fed chair in 2018, but later clashed with Powell when the Fed chief rejected calls for looser monetary policy.

Trump flirted with the idea of ​​ousting the central banker at the time, but Powell told then-Treasury Secretary Steven Mnuchin that he would fight his removal, even if any legal costs would come out of his own pocket, the newspaper said magazine.

A Fed spokesman declined to comment. Trump's presidential transition office did not directly address the report, saying only that he would soon begin making decisions about who will serve in his second administration. But that magazine pointed out that he admitted last month that he had considered firing Powell during his first term.

“I threatened to fire him,” Trump said at the Economic Club of Chicago. “There was a question about whether you could or not.”

Fast forward to last week. During a press conference on Thursday following the Fed's rate cut, Powell was asked if he would resign if Trump demanded it, and Powell simply replied, “No.” He was later asked whether he believed a president had the authority to fire or demote a Fed chairman or another Fed official in a senior position, and Powell replied: “That's not allowed by law.”

This exchange prompted us Sen. Mike Lee, R-Utah, will post on X“The executive branch should be under the leadership of the president. This is how the Constitution was designed. The Federal Reserve is one of many examples of how we have deviated from the Constitution in this regard. Another reason we should #EndTheFed.”

Tesla CEO Elon Musk, who is expected to play a role in the Trump administration, then reposted with a “100” emoji, indicating strong support.

Economists say the Fed's independence is key to setting monetary policy without political pressures that could weaken its credibility in fighting inflation.

Currently, Trump and Powell appear to be on the same page about lower interest rates. But that could change perhaps as soon as early 2025 and potentially lead to another showdown.

While the Fed is expected to cut rates again in December, some analysts say further signs that inflation is stubborn or that the economy is still growing strongly could cause policymakers to hold off on further rate cuts.

Trump has recently suggested that he is better at monetary policy than Powell, who previously worked in investment banking and the Treasury Department, and has expressed a desire to exert some influence.

“I think the president should have at least done it [a] Say in there,” Trump said in August. “In my case, I've made a lot of money, been very successful, and I think I have better instincts than, in many cases, the people who are on the Federal Reserve or the chairman.”

And while Trump also told Bloomberg in June that he would let Powell finish his term, he also appeared to qualify that. “I would let him dish it out, especially if I thought he was doing the right thing.”

Powell's term as chairman ends in May 2026 and his term as Fed governor ends in January 2028.

In 2019, Powell publicly and privately vowed not to let a president force him out of office. During a hearing on Capitol Hill, he was asked if he would leave if asked and he said no.

And according to the magazinePowell also told a visitor this year, “I will not, under any circumstances, voluntarily leave this job until my term ends.” None at all. It doesn't even occur to me that there would be a situation in which I would not complete my sentence, except by dying.”

Meanwhile, Scott Bessent, an economic adviser to Trump who could be tapped to be Treasury secretary, has suggested that an early appointment of Powell's successor could serve as “shadow Fed chair,” essentially making Powell a lame duck with less influence .

The magazine said Bessent no longer thought the idea was worth pursuing after he received criticism of it, but defended it in a speech last week Forbes that it “strengthens the Fed’s credibility.” The investment firm Key Square, founded by Bessent, did not immediately respond to a request for comment.

The Fed has not been independent in the past. But after President Richard Nixon pressured then-Fed Chairman Arthur Burns to ease monetary policy before the 1972 election, independence became the norm and proved crucial as the Fed aggressively raised interest rates in the 1970s and 1980s to combat inflation.

When it comes to dismissal, the Federal Reserve Act states that any Fed board member can only be removed “for cause.” There is no language in the law that directly addresses the removal of the Fed chairman, but the position is considered a board member.

If Trump tries to fire Powell before his term, a lawsuit could send the matter to the Supreme Court, said Brookings Institution financial historian and legal scholar Peter Conti-Brown Assets previously.

But Trump has the opportunity to change the law with the help of a cooperative Congress, which appears to be under complete Republican control.

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