Recent activity in prediction markets indicates a significant probability that President Donald Trump will take steps to remove Jerome Powell from his role as the Federal Reserve Chairman and also from his position as a member of the Federal Reserve Board of Governors prior to the conclusion of Powell's term as a governor. Currently, these markets estimate about a 63% chance of such an action occurring.
Powell's current appointment as the Chairman is due to expire in May next year. However, his position as a governor on the Fed board extends beyond this, with an additional two years remaining on his term, set to end on May 15, 2026. Within this broader timeframe, market participants assign roughly a 41% probability to Powell being removed from his governor role before that date.
This evolving scenario follows the public announcement that the Department of Justice has initiated a criminal investigation involving Powell. The disclosure of this inquiry has heightened tensions between the Federal Reserve and the White House. Several allies of the President as well as administration officials have expressed apprehension regarding the possibility of a direct confrontation with the Federal Reserve. They caution that such a public dispute could serve as a catalyst for raising interest rates and could contribute to increased volatility or disruption in financial markets.
Senator Thom Tillis, a Republican representing North Carolina, has voiced opposition to any Federal Reserve nominees proposed by President Trump until the ongoing legal questions surrounding Powell are resolved. Given the narrow partisan balance in the Senate Banking Committee, such opposition may effectively stall or block confirmation proceedings for prospective Fed nominees, as a full floor vote appears unlikely without committee approval.
Amid these developments, the Federal Reserve has pursued strategic measures intended to safeguard itself from political pressures. In December, the institution took the unusual step of reappointing all 12 regional Reserve Bank presidents and their first vice presidents well in advance of the expiration of their terms. Furthermore, these leadership roles within the Fed’s operating structure were confirmed unanimously for new five-year terms set to begin on March 1, 2026. The timing of these actions has drawn considerable attention and is widely interpreted as an attempt to bolster the Fed's institutional independence during a period of political scrutiny.
Renowned economist Justin Wolfers commented on this decisive move, describing it as a deliberate effort to "Trump-proof" the Federal Reserve by diminishing the potential for political interference in its ongoing policies and governance.