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President Trump’s drawn-out campaign to oust Jerome Powell may end up prolonging the Fed chair’s tenure at the central bank.
Powell said this past week he intends to continue serving as the Fed’s chair pro tem in the event that Kevin Warsh, Trump’s nominee to be the next chair, is not confirmed by the Senate before Powell’s term ends in May.
“That is what the law calls for,” Powell told reporters Wednesday, noting the historical precedent for such a scenario, including when he was nominated for a second term as chair by former President Joe Biden and the Senate was late in confirming him.
Powell also said, for the first time, that he will not step down from the Fed’s Board of Governors until a Department of Justice investigation focused on the Fed and Powell individually is resolved.
Read more: How much control does the president have over the Fed and interest rates?
“I have no intention of leaving the board until the investigation is well and truly over with transparency and finality,” Powell said following the Fed’s policy meeting last Wednesday.
That prompted another avalanche of criticism from Trump, who has repeatedly slammed Powell for not slashing interest rates fast enough and regularly threatened to remove him. After the meeting — in which the Fed held rates steady in the face of surging oil prices and job market worries — Trump called Powell “grossly incompetent” and “maybe a dishonest guy.”
“He should be lowering interest rates,” the president said. “Who would not lower them?”
Tensions between the Fed and the administration reached a crescendo in January when the Justice Department, under D.C. District Attorney Jeanine Pirro, launched its criminal probe into Powell’s testimony to Congress about cost overruns on renovations to the Fed’s headquarters in Washington.
A federal judge this month threw out two subpoenas the Justice Department issued to the Fed, essentially declaring the criminal probe invalid and handing a significant victory to Powell. Pirro has vowed to appeal.
The case is not only causing Powell to rethink when he’ll step down fully from the Fed, but it’s also holding up Warsh’s confirmation. A key Republican senator — who otherwise supports Warsh — has vowed to block his confirmation until the Powell investigation is resolved.
So despite Trump’s rhetoric and his administration’s attempts to force an early departure by Powell, whose term as chair ends in less than two months, the result could be to prolong his stay.
“The irony of the subpoena misadventure is that it may finally succeed in creating a shadow Fed chair … one called Jay Powell,” said Krishna Guha, head of global policy and central banking for Evercore ISI.
