Powell says he will remain on the board of the US Federal Reserve, denying Trump the chance to name his successor
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Jerome Powell said Wednesday he plans to stay on the board of the US Federal Reserve after his term as chairman ends next month “for a period of time, to be determined,” saying the “unprecedented” legislative attacks by the Trump administration have put the central bank’s independence at risk.
“I’m concerned that this attack is attacking the institution and putting at risk what is important to the public,” Powell said at a press conference after the Fed announced its decision to keep interest rates unchanged.
Powell’s decision to stay — the first time a Fed chairman has sat on the board as governor since 1948 — denies President Donald Trump the chance to fill a seat on the central bank’s seven-member governing board with a self-appointed appointee. The Senate Banking Committee previously approved Powell’s successor as chairman, Trump nominee Kevin Warsh, on a party-line vote.
Powell will continue as Fed governor, possibly until January 2028. Warsh, if confirmed, will take the seat currently held by former Trump appointee Stephen Miran, whose term ended in January.
The introduction of a criminal investigation into the chairman of the Federal Reserve, Jerome Powell, politicians on all sides are asking what the independence of the institution in charge of the country’s monetary policy could mean.
Trump’s plans may be challenged
Powell’s move could make it harder for Warsh to implement the rate cuts that Trump wants, and that Warsh talked about last year, economists said.
“It probably means it’s going to take Warsh a while to build the consensus he’s trying to build,” said David Seif, chief emerging markets economist at Nomura, an investment bank.
US Attorney for the District of Columbia Jeanine Pirro said on Friday her office is ending its investigation into the extensive renovations of the Fed building because the Fed’s inspector general will review them. But he added that his office could reopen the investigation if “the facts warrant it.” And Pirro had previously said that he would appeal the court’s decision that dismissed the summons issued by his office.
Powell said Wednesday he had been assured by the Justice Department that the decision would not lead to a reopening of the investigation unless a separate investigation by the Fed’s inspector general found evidence of wrongdoing.
Apparently, that didn’t bring Powell the closure he felt was necessary.
“I’m waiting for the investigation to go well and really end and be transparent,” he said. “I’m waiting for that and I’ll go when I see fit.”
Economist Justin Wolfers says that beyond the White House, ‘no one alive’ sees the threat of criminal charges against US Federal Reserve Chairman Jerome Powell as attempts to ‘torture’ him with interest rates. Wolfers compares this strategy to Turkey, where he says ‘a populist hard-liner whose idiosyncratic views on economics undermined the independence of Turkey’s central bank’ – and sent inflation soaring.
The ratio is left unchanged
The Fed on Wednesday left its interest rate unchanged for the third straight meeting but signaled it could still cut rates in the coming months, a move that has attracted the most opposition since October 1992. Three officials argued against removing the reference to future cuts, while a fourth, Miran, argued in favor of an immediate rate cut.
Detractors underscored the level of division in the Fed’s 12-member rate-setting committee before Powell’s term as chairman ends on May 15.
“Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” the Fed said in a statement after its two-day meeting. “Inflation has lifted, partly reflecting rising global energy prices.”
Andrew Chang explains why Trump is upset with Federal Reserve chairman Jerome Powell and how he might try to oust him. Also, how Canada’s geography and technology can help detect missile threats and whether Trump can build the Golden Dome outside of Canada.
Trump replied
Trump responded to Powell’s decision late Wednesday on his social media website: “Jerome ‘Too Late’ Powell wants to stay at the Fed because he can’t find a job anywhere else – Nobody wants him,” Trump said, using his nickname for the Fed chairman.
Warsh promised “regime change” at the central bank and would make major changes to its economic models, communication strategies, and balance sheet. He has opposed a rate cut, as Trump has called for, but will likely find it difficult to implement it with inflation running past 3 percent, above the Fed’s 2 percent target.
When asked if he believed Warsh would withstand political pressure from Trump, Powell responded, “He’s been very testy in his compliance, and I’m taking him at his word.”
Powell’s decision to stay could fuel rifts within the Trump administration and create what some analysts call a “two Popes” situation, with a former chair and former chair both on the Fed’s board. If so, the divide among policymakers could grow, if some decide to follow Powell’s lead instead of Warsh’s.
Powell dismissed the idea that his stay could cause tension, saying, “My intention is not to interfere,” later adding, “I’m not looking to be a loudmouth or anything like that.”
Nevertheless, Powell said he is still concerned about the Fed’s independence from the White House, which he said is important in its ability to set rates for the benefit of the public, rather than responding to political pressure. When the Fed raises or lowers its short-term rate, it affects the cost of housing, auto loans, and business borrowing in the long run.
The Fed’s independence remains “at risk,” he said. “We’re going to have to turn to the courts to enforce … our ability to make fiscal policy without political considerations. We’ve had to do that and we’ve been successful so far, but that’s not over, none of that has been finalized.”
