The Fed may have reassured Powell it’s safe to leave the board early when a new chair takes over

Earlier this month, the Fed reappointed its regional bank presidents a bit earlier than usual, surprising Wall Street and easing concerns about its independence in the face of President Donald Trump’s continued demands for steeper rate cuts.

It came after recent suggestions from the Trump administration that new conditions ought to be placed on the Fed presidents, raising fears it was eyeing a purge. That fit a pattern of extreme pressure on policymakers. Trump has relentlessly insulted Powell for not easing more, considered firing him, threatened to sue over cost overruns on the Fed’s headquarters renovation, and is still attempting to oust Governor Lisa Cook.

Given Powell’s commitment to Fed independence, there were doubts that he would leave the board of governors when his replacement as chair comes in, bucking tradition, in order to retain a vote on the rate-setting Federal Open Market Committee and help ensure policy stays apolitical. His term as chair expires on May 15, 2026, but his term as a governor extends to January 2028. 

But with the regional presidents re-upped, that adds some stability to the FOMC, which is comprised of governors and presidents, potentially letting him ride off into the sunset.

“I don’t think Powell wants to stay. I think he’s done with this job, and I don’t blame him,” Christopher Hodge, chief U.S. economist at Natixis CIB Americas, told Fortune. 

He put a high probability on Powell leaving the board, but a few uncertainties remain. One is Trump’s pick to be the new Fed chair. The current names under consideration—Kevin Hassett, Kevin Warsh, and Chis Waller—would be palatable, but an unserious candidate from left field would give Powell pause, according to Hodge, who previously served as principal economist at the New York Fed.

Another unknown is how the Supreme Court will rule in Trump’s effort to fire Cook over mortgage fraud claims, which she had denied. If the justices determine the White House can easily dismiss governors, then Powell might stay on.

“But ultimately, I think this reappointment of these regional Fed presidents is a barrier that he wanted to get over, and I think that certainly helped clear the way for him stepping down after the meeting in May,” Hodge said.

He added, “as long as Powell is fairly certain that the guardrails are staying in place, and that the Fed is in a long-run position to stay credible, then I think he’s going to step down” from the board of governors. 

Robert Kaplan, vice chairman at Goldman Sachs and former president of the Dallas Fed, said the reappointment of the Fed presidents was big news that didn’t get much attention.

He told CNBC last week there was some concern that a reshuffling on the board of governors would lead to changes in the Fed presidents, who must be approved by the governors.

“I think it’s possible that that won’t happen. And that means the next Fed chair will have to get seven votes through persuasion and debate and getting a consensus. You won’t come in with seven votes wired,” Kaplan added, referring to the votes need for a majority on the 12-member FOMC.

He also urged Powell to not remain on the board when his term as chairman expires. If Powell hangs on, he might be seen as a thorn in the side of the new chair, Kaplan explained.

“In the same way a CEO would leave and leave it to their successor, I think that’s the gracious thing to do,” he said. “I think Jay is a gracious person, and I think it’s the right thing for him to do.”