This is one of the most important issues surrounding the Fed in 2026, but Fed Chairman Jerome Powell is keeping his mouth shut.
“I am focused on the remainder of my time as chairman,” Powell said at a news conference in December. “I don’t have anything new to tell you about that.”
The question is whether Mr. Powell will remain at the Fed after his chairmanship ends in May. Powell has two years left in his term as president, and Mr. Powell himself has sparked speculation by repeatedly refusing to answer questions.
That’s the question being asked on Wall Street as Fed watchers try to determine the makeup of the rate-setting Open Market Committee and whether President Donald Trump’s appointees will be able to take control of the Fed’s powerful board. And the question is being asked at the Treasury Department and the White House, as they try to figure out how many board seats Mr. Trump needs to fill this year, who will fill them, and when they will become available.
This question hasn’t been asked in decades, as previous chairmen like Ben Bernanke and Janet Yellen quietly slipped off the board to other government positions, retirement, or the private sector while their terms remained. That even the question about Mr. Powell remains unclear is a sign of the era of a president who openly sought control of Fed policy in unprecedented ways and a Fed chairman who valiantly resisted that encroachment and sought to protect the Fed’s independence.
Fed observers interviewed by CNBC said Mr. Powell saw this as a difficult decision that pitted the personal against the professional. Mr. Powell, a golfer, avid guitarist and relative new grandfather, is considered well-equipped to adapt to civilian life after 13 years at the Fed, eight of which he served as chairman. For most of those eight years, Mr. Powell endured chilling public criticism from the president who nominated him as chairman.
But after his long tenure, Mr. Powell also has deep loyalties to the agency and concerns about its fate under the challenges posed by a president who has effectively eliminated the independence of several agencies. Mr. Trump has repeatedly pressured the Fed to lower interest rates and has vowed that his nominees must agree with him or “never be Fed Chairman.”
Most of the people interviewed by CNBC said they did not personally know what decisions Mr. Powell would make, and said they believed Mr. Powell was likely to leave the Fed when his term as chairman expires in May. But no one is ruling out the possibility that Mr. Powell may decide to stay, perhaps for a short period of time. When his 14-year term as chairman ended in 1948, only former Fed Chairman Marriner Eccles remained in office. As president, Eccles helped conclude the 1951 Treasury-Federal Agreement, which ended the Fed’s obligation to maintain low interest rates and helped establish the modern concept of Fed independence. The Trump administration wants to lower interest rates as part of its efforts to reduce the cost of servicing U.S. debt.
At one level, Powell’s decision is simple mathematics. Three Trump appointees now serve on the seven-person board of directors. Powell’s departure would immediately hand control of the board to the president. If they vote as a bloc (an uncertain assumption), they could go a long way toward fulfilling the president’s demands for ultra-low interest rates.
Even more concerning is that the Federal Reserve Act appears to give a majority of the board the power to remove individual bank presidents who oppose rate cuts. While there are questions about whether he can be fired without cause, Powell’s continued presence on the board, even as a minority, could help avoid such an extreme outcome.
Some people interviewed by CNBC suggested that the outcome of the case with Fed Governor Lisa Cook could weigh on Powell’s decision. President Trump fired Cook amid allegations of mortgage fraud, which Cook denies. The court halted Cook’s dismissal and allowed him to continue serving. The Department of Justice has not brought charges against Cook.
However, the Supreme Court is expected to hear the case on January 21 and issue a decision some time thereafter. If Mr. Cook is removed from office, Mr. Trump will immediately gain a majority. The question is whether the president can get broad authority from the Supreme Court to remove other directors. In that case, Mr. Powell would likely be next on the president’s attack list.
However, many of the concerns assume worst-case scenarios that may not be justified. There is no guarantee that governors appointed by the president will act in accordance with the president’s orders. For example, all three President Trump-appointed presidents just voted to reappoint all 12 local bank presidents to new five-year terms, but the board still has the power to fire them individually.
One area of speculation is whether Mr. Powell is trying to exert influence over the administration. By not disclosing his choice, Powell may be sending a message that he will stay in office if the president nominates an extreme candidate, but will step down if the president deems it reasonable. There is no evidence that Mr. Powell actually thinks that way. Mr. Powell has remained generally apolitical on fiscal issues throughout his tenure, and has not publicly responded to the president’s frequent insults.
This has led some Fed observers to believe that Mr. Powell will eventually step down once his term as chairman ends. Remaining would be an obvious political move, going against recent institutional tradition and exposing the Fed to even greater political criticism. In that case, Mr. Powell would be undermining the very system he was trying to maintain by staying.
Another theory: Mr. Powell’s current refusal to say what he will do could be seen as a simple symbolic exercise of independence, reiterating that it is his legal right to decide when to step down and that he will announce his intentions when he is ready.
