Powell could stay at Fed even after being removed as chair

There is another dimension to the saga of President Donald Trump’s efforts to reshape the Federal Reserve; It’s about whether current Chairman Jerome Powell will leave after his term ends.

Powell’s term as central bank governor ends May 15, and Trump is likely to nominate his successor well before then. Treasury Secretary Scott Bessent even told CNBC on Tuesday that the long-awaited election could come as soon as next week.

However, Powell’s 14-year term as governor extends until January 31, 2028.

The historical precedent has been that nearly all outgoing Fed chairmen also leave executive roles; But Powell may decide to reverse course if he feels the threats to the central bank’s independence are acute enough to warrant his stay. Marriner Eccles had done this in the late 1940s because he viewed the impeachment of then-President Harry Truman as a political move.

More and more vocal

Trump has become increasingly vocal about controlling the Fed. This came about through telling Powell and his colleagues that he thought the president should be consulted on interest rate decisions, along with persistent criticism of his own appointments.

Some on Wall Street think the prospect of Trump gaining more control over the Fed Board of Governors and using that to direct monetary policy could persuade Powell to stay. Such speculation has increased in recent days following revelations that the Justice Department was investigating Powell for potential criminal prosecution and Powell’s public statement that a subpoena in the matter was a “pretext” for Trump’s effort to control the Fed.

The sequence of events “Powell, [Fed Governor Michael] Barr and others will remain in office beyond May,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a recent note.

Although Barr’s term lasts until 2032, there were also some rumors that he might choose to leave. Barr was previously deputy commissioner of bank supervision, but left the post shortly after Trump’s second term began, paving the way for Trump to potentially replace him. Governor Michelle Bowman, whom Trump appointed in his first term, was appointed as the supervisor.

Similarly, Philip Jefferson, vice chairman of the rate-setting Federal Open Market Committee, could choose to remain in a seat that does not expire until January 2036 or leave.

But speculation on the street is mounting that threats to the Fed’s independence could make it more likely that all current chairmen will remain in office.

“We think the likelihood that Chairman Powell will remain on the Board as governor after his presidency ends in May increases with his announcement,” Nomura economists wrote in a note. he said. “Trump’s attempt to influence monetary policy could encourage current FOMC participants to step back.”

Markets see Powell’s absence

But traders are betting that Powell will leave.

Prediction markets site Kalshi is currently Possibility of Powell leaving That bet, at 70% before August 2026, means Trump’s nominee will vacate the seat immediately or shortly after being replaced as president, assuming his nominee clears the Senate. Sen. Thom Tillis, R-NC, has vowed to block any Fed appointments until the Justice Department issue is resolved.

Powell avoided addressing the issue. A Fed spokesman contacted by CNBC.com said there would be no comment from the president’s office.

At the press conference following the Fed’s last meeting in December, Powell also sidestepped a question on the subject, saying only: “I’m focused on my remaining time as chairman. I don’t have anything new to tell you about that.”

Meanwhile, Trump’s efforts to remove Powell from his office could backfire and harden the positions of other Fed officials at a time when the president continues to push for lower interest rates.

“As a result, Trump’s push for Fed compliance may ironically lead to greater Fed independence,” wrote market veteran Ed Yardeni, president of Yardeni Research. “Accordingly, President Trump’s appointee to lead the Fed may be less able to gain consensus around his views than past Fed chairmen, giving Trump less control over the Fed’s actions than Trump might anticipate.”