Federal Reserve Chairman Jerome PowellJerome PowellBiden selects Sarah Bloom Raskin, two others for Fed board Overnight Energy & Environment — Earth records its hottest years ever On the Money — SCOTUS strikes down Biden vax-or-test rules MORE asserted the central bank’s independence in and denounced the “damage” of political influence on monetary policy amid new criticism from President TrumpDonald TrumpSanders calls out Manchin, Sinema ahead of filibuster showdown Laura Ingraham 'not saying' if she'd support Trump in 2024 The Hill's 12:30 Report: Djokovic may not compete in French Open over vaccine requirement MORE.
In a Tuesday speech, Powell insisted the the Fed would not let political considerations shape its efforts to foster maximum employment and stable prices as Trump ramps up pressure on the bank to cut interest rates.
“The Fed is insulated from short-term political pressures—what is often referred to as our ‘independence,’” Powell said during a speech to the Council on Foreign Relations in New York.
“Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests.”
Powell stressed that the Fed’s independence makes its crucial for the central bank to listen to “opinions, ideas, and critiques from people throughout the economy” as it reviews the impact of its monetary policy moves.
But Powell’s defense of the bank comes after Trump bashed the Fed and asserted his power to oust the chairman in a recent series of tweets and interviews.
Trump told The Hill in an interview Monday that he has the power to fire Powell, but did not plan to do so at this time. The president has also renewed his long-running claim that the Fed has held back the economy from record highs by raising rates four times in 2018
While Trump insists he can fire Powell, legal scholars say he likely lacks the power to oust the chairman.
Under the Federal Reserve Act, a Fed chairman or governor can only be fired by the president “for cause,” which is considered to be “inefficiency, neglect of duty, or malfeasance in office” per a 1935 Supreme Court ruling.
Experts say Trump’s gripes with Powell over policy do not likely meet the standard for adequate cause to fire the chairman. Powell has also expressed doubts about Trump’s ability to fire him and has said he would not resign if asked to by the president.
“I think the law is clear that I have a four-year term and I intend to serve it," Powell said Wednesday, following the Fed's announcement that it would hold rates steady.
The Fed last week declined to cut interest rates, but said it stood ready to lower borrowing costs if the economy slowed and inflation remained low. Several Fed officials projected the bank to cut rates twice before the end of 2019, but Powell said he and his colleagues wanted to see more evidence that the economy needed stimulus.
"Monetary policy should not overreact to any individual data point or short-term swing in sentiment," Powell added Tuesday. "Doing so would risk adding even more uncertainty to the outlook."