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As the leadership transition process at the Fed enters a critical phase, all eyes are on the historic decision to be made by Fed Chairman Jerome Powell.
Powell’s term ends on May 15, and the main uncertainty isn’t whether he will step down, but whether he will retain his position on the board.
The US Justice Department’s announcement that it had dropped the criminal investigation against Powell added a new dimension to the process. Republican Senator Thom Tillis stated that he had received assurances that the investigation was effectively over, paving the way for Kevin Warsh, who is expected to succeed Powell, to be confirmed in the Senate. This development strengthens the possibility of Warsh taking over before Powell’s term ends.
However, the most critical decision facing Powell remains unclear. While the vast majority of FED chairmen leave the board of governors upon the end of their terms, it remains uncertain whether Powell will retain his position on the board, a role he could potentially hold until 2028. Powell previously stated that such a decision would require the investigation to be “fully and transparently concluded.” Current developments have not entirely eliminated the question of whether this condition has been met.
On the other hand, interim Attorney General Todd Blanche stated that some aspects of the investigation are still under review, particularly pointing to the ongoing audit of the Fed’s building renovation costs. This further complicates Powell’s decision-making process.
If Powell were to leave his post completely, US President Donald Trump would have the opportunity to appoint another member to the Fed’s board of governors. This is considered a significant development that could alter the current balance of power. Conversely, Powell’s continued presence could be seen as a safeguard for the Fed’s independence by maintaining political balance on the board.
Experts point out that Powell’s decision is not just a personal preference, but also a matter of institutional balance. While some economists argue that Powell’s departure would be healthier for Warsh so that he can guide Fed policies after taking office, others believe that Powell’s remaining would increase the Fed’s resilience to political pressure.
While Powell is known to want to return to private life after his nearly 14-year career at the Fed, the current political atmosphere complicates this decision. There are also assessments that his departure could indirectly legitimize the increased political pressure he has recently faced.
*This is not investment advice.
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