MW Could Powell's decision to stay worsen relations between the Fed and the White House?
By Greg Robb
Move seen as poking the president with a sharp stick
Federal Reserve Chair Jerome Powell arrives for what was likely his final press conference on Wednesday.
When Federal Reserve Chair Jerome Powell said Wednesday that he would stay on at the central bank after his term as chair ends next month, he cited a desire to protect the institution from political influence. But his decision may only inflame tensions between the Fed and the White House, experts say.
"I think there's a point where standing up to Trump moves into poking the bear with a sharp stick," said Vincent Reinhart, chief economist at BNY Investments.
Fed watchers had speculated for months about whether Powell would stay on the board after his term as chair ends on May 15. As long as Powell remains, President Donald Trump can't nominate a new member of the Fed board.
Powell can stay on the Fed board until his term expires in early 2028.
At his press conference Wednesday, Powell said he will stay as a governor for a period of time to be determined.
Powell said he would not leave until all investigations into his role in cost overruns for renovation of the Fed's headquarters are "well and truly over."
The Justice Department has closed its criminal investigation into the renovation, but a separate inquiry by the Fed's inspector general, started last July, is still ongoing. The investigation came after months of criticism of the Fed, and Powell in particular, from Trump, who wants the central bank to lower interest rates.
"I'm encouraged by recent developments, and I'm watching the remaining steps in this process carefully," Powell said.
The president's first public reaction to Powell's announcement was muted, saying only that Powell is staying at the Fed because no one else would hire him.
In the past, Trump has said he would fire Powell if he stayed on as Fed governor.
On Thursday, Trump said he didn't care if Powell stays on the board.
Little historical precedent
Powell is not the first Fed chair to stay on the board after his term as chair ended. Former Fed Chair Marriner Eccles stayed on the Fed board for three years after being demoted by President Harry Truman in 1948.
Still, analysts said the two situations are not really comparable.
The pressure the Trump White House has put on the Fed is truly unusual.
"I think really everybody would want this to de-escalate. Powell would love to retire. The best thing would be for the White House to let the Fed do its job," said Claudia Sahm, a former top Fed staffer and now chief economist at New Century Advisors.
"The biggest risk with Powell staying is it could provoke more tension between the White House and the Fed," Sahm said, adding that Powell might not leave on his own until he's convinced the Fed's independence isn't under threat.
"I put a reasonably good chance on the president firing Powell," Sahm said.
"If the relationship between the White House and the Fed gets worse, some people are going to blame Powell for that," Sahm added.
Little upside to hanging around
Mark Spindel, who co-authored a book on Fed independence, said he thinks Powell won't stay very long as a governor.
"My guess is it's a very short holdover," Spindel said. As soon as the Fed's inspector-general's report comes out, which is likely to find no criminal wrongdoing by the chair, Powell will leave, he said.
Reinhart also said he thought Powell's condition for retiring is narrowly focused on his own circumstances.
There is no other "upside" for the Fed or Powell if he remains on the board of governors after the inspector-general's report is released.
"I don't think he does anybody, including himself, any good by hanging around," Spindel said.
Spindel said Powell's continued presence could confuse markets and would complicate communications between Powell and his likely successor as Fed chair, Kevin Warsh.
In addition, if Powell is still on the board, Trump can continue to blame him, not Warsh, if the Fed doesn't cut interest rates, said Tim Duy, chief economist at SGH Macro Advisors.
"Warsh can't cut rates. So Trump gets his guy at the Fed, but he doesn't get cuts. Where does he direct his anger? Powell," said Duy.
Sahm and Duy both said it wasn't clear if Powell would leave after the inspector-general's decision.
The necessary condition for Powell to leave is to clear up the legal matters. Whether that is sufficient for him to leave is unclear, Duy said.
The legal issues allow Powell to avoid the bigger question - "Do I have to stay to protect the institution's independence?" Duy said.
"The Fed has to be able to survive without him at some point. Either the Senate or the markets have to be guardrails" of the Fed's independence, Duy said.
-Greg Robb
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(END) Dow Jones Newswires
April 30, 2026 17:27 ET (21:27 GMT)
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