President Donald Trump has announced that he currently has no plans to dismiss Federal Reserve Chair Jerome Powell, even as the Department of Justice carries out a criminal investigation involving the Federal Reserve. Speaking with Reuters on Wednesday, Trump described the situation regarding Powell as being in "a little bit of a holding pattern." While he acknowledged that the administration is evaluating its next steps concerning the Federal Reserve's leadership, Trump stopped short of revealing specific plans, characterizing the moment as "too soon, too early" to take definitive action.
Despite ruling out immediate removal, the president disclosed that he is considering other candidates who could potentially succeed Powell in the role of Federal Reserve Chair. Among the names mentioned are former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett. On the other hand, Trump decisively excluded U.S. Treasury Secretary Scott Bessent from consideration, noting that Bessent prefers to maintain his current post.
Looking ahead, Trump indicated that the announcement regarding the new Fed Chair is expected within the "next couple of weeks," signaling a forthcoming decision but allowing time for deliberation.
Details From Powell Challenge DOJ Probe Allegations
The relationship between the Trump administration and the Federal Reserve has been marked by tensions, particularly with the Department of Justice’s criminal investigation adding complexity. A letter from Powell addressed to members of the Senate has brought forward information about a $2.5 billion renovation project at the Federal Reserve, which appears to contradict the DOJ’s allegations suggesting that Powell misled Congress in relation to this matter.
Financial market participants, such as traders on the Kalshi platform, currently assign a 44 percent probability that Trump might attempt to remove Powell from both the Chairmanship and his position on the Board of Governors before the term concludes in 2027. This speculation persists despite Powell’s current term as Chair set to expire in May and his Board governorship extending for an additional two years beyond that.
Concerns Raised Over the Federal Reserve’s Autonomy
President Trump's public remarks threatening legal action against Powell in connection to the renovation project have amplified concerns about the Federal Reserve’s operational independence. Economist Justin Wolfers highlighted the potential danger of such threats, cautioning that they evoke fears comparable to hyperinflation episodes in countries with compromised institutional independence, including Argentina, Russia, and Venezuela.
Furthermore, former Federal Reserve Chair Janet Yellen has articulated her unease regarding the Department of Justice’s investigation into Powell, describing it as "extremely chilling" for the institution’s independence. Yellen expressed surprise at the apparent lack of anxiety within financial markets, suggesting that such a significant challenge to central bank autonomy should be a cause for market concern.
These developments underscore an ongoing debate about the degree to which political considerations might influence the Federal Reserve’s leadership and operations, especially amid legal inquiries and scrutiny.
Looking Forward
The White House’s cautious stance on Powell's future, combined with disclosed interest in alternative leadership candidates, indicates a nuanced balancing act between political priorities and institutional stability. As the DOJ continues its investigation and market participants weigh the implications of potential leadership changes, observers remain attentive to forthcoming announcements and their impact on the Federal Reserve’s trajectory.