It’s one of the most important questions surrounding the Federal Reserve in 2026, and Fed Chair Jerome Powell has been pointedly mum.
“I’m focused on my remaining time as chair,” Powell said at the December press conference. “I haven’t got anything new on that to tell you.”
The question: whether Powell will remain on the Fed once his chairmanship ends in May. He will have two years left on his term as governor and Powell himself has invited the speculation by repeatedly refusing to answer the question.
It’s a question being asked on Wall Street as Fed watchers try to game out the makeup of the rate-setting Open Market Committee and whether appointees of President Donald Trump will have control of the Fed’s powerful Board of Governors. And it’s being asked in the Treasury Department and the White House, where they are trying to figure out how many slots on the board Trump will have to fill this year, who might fill them and when those slots will be available.
It’s a question that has not been asked in decades because prior chairs, like Ben Bernanke and Janet Yellen, slid quietly off the board into other government positions, retirement or the private sector with time remaining on their governor terms. That the question about Powell is even unclear is a sign of the times with a president who, in unprecedented ways, openly seeks control of Fed policy and a Fed chair who has defiantly resisted that encroachment and tried to protect the Fed’s independence.
Fed observers interviewed by CNBC said they see it as a wrenching decision for Powell that pits the personal against the professional. A golfer, avid guitar player and relatively new grandfather, Powell is thought to be more than ready for civilian life after 13 years at the Fed, including eight as chair. For much of those eight years, Powell endured withering public criticism from the president, who named him as chair.
But after that lengthy tenure, Powell also holds deep loyalty to the institution and concern about its fate under the challenges posed by a president who has virtually eliminated the independence of multiple government entities. Trump has repeatedly pressured the Fed to lower rates and made clear that his nominee needs to agree with him or they “will never be Fed Chairman.”
Most of those interviewed by CNBC, who said they had no personal knowledge of what Powell would decide, said they believe Powell will likely leave the Fed when his term as chair ends in May. None, however, would rule out some possibility that Powell would decide to stay, perhaps for a short time. Only former Fed Chair Marriner Eccles stayed on as a governor when his 14-year tenure as chair ended in 1948. As a governor, Eccles was instrumental in striking the 1951 Treasury-Fed accord that ended the Fed’s obligation to keep rates low and helped establish the modern notion of Fed independence. The Trump administration wants to lower rates, in part, to reduce the cost of servicing the U.S. debt.
On one level, the decision for Powell is a simple one of math. Three Trump appointees currently sit on the seven-member board of governors. If Powell leaves that would immediately hand the president the majority of the board. If they voted as a bloc — an uncertain assumption — it could go a long way toward delivering the president his call for ultra-low interest rates.
Of more concern, the Federal Reserve Act appears to give the board’s majority the ability to fire individual bank presidents who oppose rate cuts. There is some doubt about whether the firing could be done without cause, but Powell’s continued presence on the board, even if he were in the minority, could help stave off such extreme outcomes.
Among those interviewed by CNBC, some suggested the outcome of Fed Gov. Lisa Cook’s case could weigh on Powell’s decision. Trump fired Cook amid an allegation of mortgage fraud, which she has denied. Courts have stayed the firing and allowed Cook to remain in office. The Justice Department has not brought charges against Cook.
But the Supreme Court will hear the case on January 21 with a decision sometime after that. If Cook is removed, that would immediately give Trump the majority. The question is whether it comes with broad authority from the Supreme Court for the president to remove other board members. In that case, Powell would likely be next on the president’s attack list.
Much of the concern, however, assumes a worst-case scenario that might not be warranted. There is no guarantee that governors appointed by the president will do his bidding. For example, all three Trump-appointed governors just voted to reappoint all 12 district bank presidents to new five-year terms, though the board would still have the power to remove them individually.
One area of speculation is whether Powell is attempting to exercise leverage over the administration. By not revealing his choice, Powell could be sending a message that he would stay if the president nominates extreme candidates but would go if he deems them reasonable. There is no evidence that Powell is actually thinking that way. Powell has remained generally apolitical on fiscal issues during his tenure and has not responded publicly to the president’s frequent insults.
All of which leads several Fed observers to believe Powell will ultimately leave when his tenure as chair is up. Staying would be on overtly political move, one that would buck recent institutional tradition and open the Fed to even greater political criticism. Powell would then be undermining the very institution he was trying to preserve by staying.
Another theory: Powell’s refusal now to say what he will do could be considered a simple, symbolic exercise of independence, reiterating that it’s his legal right to decide when he leaves and he will announce his intentions when he’s ready.
