Recent aggressive moves by the Trump administration against the Federal Reserve have heightened market expectations that Jerome Powell will remain on the Board of Governors after his term as Chair concludes in May. This would create a competing center of influence within the world's most powerful central bank, even if Powell himself is reluctant to assume such a role.
This unusual situation intensified following the U.S. Justice Department's issuance of a grand jury subpoena to the Fed. This unprecedented action is widely viewed as an escalation of President Trump's efforts to influence monetary policy.
It remains unclear how the legal proceedings will unfold or what Powell's ultimate decision regarding his future will be. Individuals familiar with Powell's thinking suggest that if he chooses to remain a Governor, it would be purely to protect the Federal Reserve as an institution, with no intention of playing the part of a "shadow chair."
However, if legal developments indeed compel Powell to stay, it would upend Trump's publicly stated plan to gain control of the Fed's Board by appointing officials who support significant interest rate cuts. Such a scenario could also establish a powerful counterbalance within the Fed, regardless of whom Trump ultimately nominates as the next Chair.
While Powell's supporters and Trump's opponents might cheer this outcome, analysts warn it could create confusion for investors, making it difficult to discern which policymaker holds sway and where interest rates are headed.
Former Cleveland Fed President Loretta Mester stated, "It could create a 'dual pope' situation, where financial markets and the public may be confused about who is in charge at the Fed."
Antulio Bomfim, Global Head of Macro at Northern Trust Asset Management and a former advisor to Powell, noted that although Powell has shown no desire to stay, the mere presence of a former Fed Chair on the Board—especially one with Powell's credentials and record of defending the Fed's reputation—would inevitably be seen as an alternative voice.
"Those who know him understand he would not aspire to be a shadow Fed chair," Bomfim said. "But at the same time, this is not something he can control."
Powell has long been tight-lipped about his personal plans, and most Fed watchers had previously expected him to depart in May. However, news of the subpoena has completely upended that expectation.
In an exceptionally rare written and video statement issued on January 11, Powell indicated the subpoena relates to his congressional testimony in June concerning the renovation of the Fed's headquarters. In a sharply worded rebuttal, he also suggested the action "should be viewed in the broader context of government threats and ongoing pressure."
Powell asserted that the threat of criminal charges essentially stems from the Fed setting interest rates based on its best assessment of the public interest, rather than catering to the President's personal preferences.
It is this forceful response that has sparked widespread speculation Powell will remain on the Fed's Board of Governors.
Powell, initially nominated as Fed Chair by Trump in 2018, has a term as a Governor that lasts until January 2028. Meanwhile, the President has stated he has selected a candidate to succeed Powell as Chair but has not revealed the identity. National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh are seen as leading contenders.
Steven Kamin, a senior fellow at the American Enterprise Institute and former head of a Fed division, suggested one possible scenario is that the Federal Open Market Committee (FOMC) would seek to cooperate with a new Chair, but circumstances could change.
"One could imagine that if the new chair is sufficiently divisive, a coalition of FOMC members could ultimately gravitate toward Powell," he said.
The backlash from the subpoena also threatens Trump's planned succession for the Fed chairmanship. Senator Thom Tillis, a senior Republican on the banking committee responsible for vetting Fed nominees, has vowed to oppose any Trump nominee until the matter is resolved.
According to informed sources, officials within the administration and Trump's inner circle are growing increasingly concerned that this escalation could provoke resistance from many current Board members and regional Fed bank presidents, making it more difficult for a new Chair to advance their policy agenda.
For now, the immediate impact on monetary policy appears limited. Fed policymakers cut the benchmark rate by 0.25 percentage points for the third consecutive time last month, following a period of stability for most of 2025. This month, citing signs of stabilization in the U.S. labor market, they signaled a likely pause on further rate moves pending more data on inflation and employment.
Should Powell choose to remain on the Board, the most direct consequence would be a delay in Trump's ability to nominate a new member to the seven-seat Board of Governors.
Trump has previously contemplated the possibility of securing a majority on the Board, which holds power over key decisions regarding personnel, regulation, and other Fed matters. A majority vote on the Board could also be used to remove regional Fed bank presidents.
"If the FOMC is unwilling to carry out the wishes of a Trump-nominated chair, and if regional bank presidents become an obstacle, would President Trump start pressuring the Fed's Board to fire one or more regional bank presidents?" asked David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution in Washington.
Trump could gain a strategic advantage in his maneuvering with Powell if he succeeds in removing Fed Governor Lisa Cook over mortgage fraud allegations. Such a move would open the door to firing any Fed Governor, including Powell. The Supreme Court is scheduled to hear arguments in that case on January 21.
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