Will he stay or will he go? With criminal probe over, Fed Chair Powell faces big decision
U.S. Federal Reserve Chairman Jerome Powell holds a press conference following the two-day meeting of the Federal Open Market Committee (FOMC) at the Federal Reserve in Washington, DC, USA, on March 18, 2026.
Kevin Lamarque | Reuters
Federal Reserve Chairman Jerome Powell is likely in his final weeks as head of the central bank and now faces a choice about whether to stay at the agency following a decision from the Justice Department on Friday.
U.S. Attorney General Jeanine Pirro announced in a social media post that she had referred the criminal investigation into renovations at the Fed headquarters to the central bank inspector general, thus leaving the Justice Department out of the investigation for now.
While a seemingly significant move, it is even more significant because Powell has vowed to remain in office until the criminal investigation is resolved.
Now that he’s made a decision, he faces a choice: Will he follow historical precedent and leave the Fed, as most other presidents in the past have done, or will he sit out the final two years of his term as chairman?
The decision could have important implications for policymaking at a particularly sensitive time.
“Powell kept his cards close to his chest. If the investigation had never happened, we think he would have left the Fed altogether on May 15,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note. he said. “But we think the Justice Department’s move may well have come too late — and the threat to reopen the investigation is too fruitless for Powell to leave on May 15.”
Instead, Guha thought Powell could stay in office for a while longer, even if he doesn’t serve out his full term as governor, which ends in January 2028.
President Donald Trump has threatened to fire Powell if he does not leave on his own after his term ends.
Issues at stake
At the heart of the issue is the perceived threat to the Fed’s immunity from political interference. Trump, like any of his predecessors, has not been as vocal about being angry at the central bank. He is demanding lower interest rates while threatening to fire Powell and is actively trying to oust Gov. Lisa Cook.
Powell’s successor, Kevin Warsh, has been criticized by some congressional Democrats as a Trump loyalist who could further jeopardize the Fed’s veneer of independence. Warsh had a confirmation hearing this week, but Sen. R.N.C. Thom Tillis had promised to hold off on the committee vote until the criminal investigation was completed.
“Our hunch is that Powell will remain the regular Fed governor for several months to avoid the appearance of a de facto defense deal or leaving under pressure,” Guha said. “Warsh’s provocative ‘regime change’ talk at the Fed also likely raises the possibility that Powell will stay around for a while longer to try to protect the institution and its staff.”
A Fed spokesman declined to comment on Powell’s plans.
If Powell leaves now, it will give Trump the opportunity to appoint another member to the Board. Counting Warsh, the president will have three appointments to the seven-member board from his first term, including Governors Christopher Waller and Michelle Bowman.
Markets are watching
While the Federal Open Market Committee requires a majority vote to change interest rates, a board majority has limited influence over policy and personnel.
At the same time, investors may view rate cuts negatively if they see the committee as politically compromised.
But David Zervos, chief market strategist at Jefferies, said Friday that he thinks Wall Street will view Powell’s departure at this time favorably. Zervos himself He interviewed for the Fed chairman position but did not make it into the final round.
“Jay saying he’s leaving at the end of his term as chairman will actually cause the market to go up, the interest rate market to be more positive, which will mean lower yields, higher prices,” Zervos said during the CNBC interview. “This will have a more significant impact than dropping the case.”
Powell will have a chance to address the issue by holding his regular press conference after the FOMC meeting on Wednesday.
Although Powell has been tight-lipped about his intentions so far, markets will be keeping a close eye on the issue and monitoring the Senate’s moves to confirm Warsh. The new president has stated that he prefers lower interest rates and is rethinking other Fed operations.
“There’s a lot of strength that will come with Kevin’s job,” Zervos said. “It could change the way a lot of things on the table work.”
