Fresh calculations
There’s a lot of talk out there about whether President Trump would or could fire current Fed Chair Jerome Powell, as well as a lot of drama surrounding renovations at the Eccles Building and 1951 Constitution Avenue. It boils down to arguments of independence and competence, but the real fight is the direction of U.S. monetary policy and the impact of tariffs on the economy. These have an outsized influence on the life of everyday Americans and the electorate, making it a hot topic in the current environment. Who will succeed Powell as Fed chair?
Thought bubble: While Powell’s term as board chairman expires in May 2026, he could stay on as Fed governor for another two years, which is the real worry of the Trump administration. In that role, Powell could be somewhat of a shadow Fed chair, especially with around 4 out of the remaining 6 Fed board governors subscribing to his policy views. The real reason why Trump is upping the pressure is that he wants Powell to be uncomfortable (or legally worried) about continuing in a governor spot past next year, which would give him another nomination to the board.
Should that be the case – and Trump replaces Adriana Kugler in January 2026 – he will have nominated a majority of the Fed board, including Michelle Bowman and Christopher Waller. While that would set a tone at the board of governors, whose seven members are permanent members of the Federal Open Market Committee, it won’t necessarily translate entirely into monetary policy (more toward bank reserve rates). Remember that it’s the FOMC’s entire twelve-member committee that is responsible for setting the federal funds rate in the U.S., which influences everything from mortgage rates and car loans to credit cards and corporate balance sheets. Waller pushes for rate cut in July
Outlook: Among the five rotating FOMC members next year are notable hawks like Minneapolis’ Neel Kashkari and Dallas’ Lorie Logan. That could complicate the picture in achieving a consensus-driven FOMC, and could raise the stakes of internal division or weaken the predictive power of policy direction. Things could get even more turbulent if Powell decides to stay on as a Fed governor or if a FOMC chair revote doesn’t take place later in the year. It could lead to two separate chair roles at the Fed board and FOMC and result in conflicting messaging at the central bank.
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