Jerome Powell will remain on the Federal Reserve’s board of governors after his term as chairman ends on May 15, a departure from tradition that could serve as both a burden and a benefit for incoming Chair Kevin Warsh. Powell cited the ongoing investigation into the renovation of the Fed’s headquarters as the reason for his decision, despite the Justice Department recently dropping its probe.
"My concern is really about the series of legal attacks on the Fed, which threaten our ability to conduct monetary policy without considering political factors," Powell told reporters. "I worry that these attacks are battering the institution." He dismissed claims that he would act as a "shadow" Fed chair, emphasizing he would maintain a low profile.
Trump’s Continued Feud with Powell
President Donald Trump wasted no time criticizing Powell’s decision, posting on social media: "Jerome ‘Too Late’ Powell wants to stay at the Fed because he can’t get a job anywhere else—Nobody wants him." This latest jab continues a longstanding feud between Trump and Powell, who resisted the president’s demands for rate cuts during his first term. Powell’s continued presence on the board could allow him to absorb some of Trump’s criticism, providing Warsh with political cover as he navigates the pressures of rising inflation.
Implications for the Fed’s Composition
Powell’s decision also means Fed Governor Stephen Miran will step down to make room for Warsh. Miran, a Trump appointee, has consistently advocated for rate cuts, often at odds with economic data. His departure removes a vocal outlier from the Federal Open Market Committee (FOMC), potentially giving Warsh more room to build consensus among governors.
"With Miran gone, the FOMC will no longer have a stark outlier making Trump’s argument that lower rates are needed now," an analyst noted.
Warsh faces a challenging environment, with several regional Fed presidents signaling hawkish stances on rates. Cleveland Fed President Beth Hammack, Minnesota Fed President Neel Kashkari, and Dallas Fed President Lorie Logan have all pushed back against easing policies, complicating Warsh’s ability to steer the committee. Powell’s lingering presence may provide a temporary buffer, but Warsh will ultimately need to assert his leadership as the Fed grapples with inflation and political pressures.