Jeremy Siegel, a finance professor emeritus at the Wharton School of the University of Pennsylvania, warned on Monday that although the U.S. Department of Justice has closed its criminal investigation into Federal Reserve Chair Jerome Powell, the political maneuvering surrounding the Fed's leadership is far from over, and markets should remain alert for potential dramatic developments.
The political deadlock has been broken, but the power struggle persists. Last Friday, the Justice Department abruptly announced the termination of its criminal probe into Powell concerning the renovation of the Fed's headquarters, referring the matter instead to an internal inspector general. This decision directly shifted the stance within Congress—key Republican Senator Thom Tillis, who had previously expressed reservations due to the investigation, stated on Sunday that he is now "prepared to move forward" with the confirmation process for Powell's designated successor, Kevin Warsh.
However, Siegel believes the true suspense of this drama lies in Powell's own decision regarding his future. Following long-standing tradition, former Fed chairs have resigned from the Board of Governors upon concluding their term as chair. Powell, however, retains his board membership, which extends until January 2028. Powell had previously stated clearly that he would not make a decision about his position until the investigation was "completely concluded." It remains unclear if this condition has now been met, as prosecutor Piro left open the possibility of reopening the investigation "should the facts warrant it."
A potential "two-headed eagle" scenario could introduce policy uncertainty. If Powell chooses to remain on the board, the Fed would face a scenario with a dual leadership structure: an outgoing chair coexisting within the Federal Open Market Committee alongside a successor known for advocating radical reform. Siegel suggests this delicate balance could introduce significant uncertainty into future policy-making.
Concurrently, if Warsh is confirmed, he is expected to bring a bold reform agenda—ranging from abolishing the dot plot, seen as a cornerstone for global asset pricing, to redefining inflation targets. Siegel expressed concern that such profound, framework-level changes would have far-reaching consequences for markets.
Market pricing and risk outlook. As of April 26, prediction markets indicated the probability of Warsh being confirmed before May 15 had surged to 86%. Siegel cautioned investors that until the leadership transition is finalized, any new developments regarding Powell's status could trigger market volatility.
He concluded that the drama surrounding Powell is far from over, and the coming weeks will reveal the final outcome of this power struggle, which will ultimately shape the direction of U.S. monetary policy for years to come.
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