Analysis: Trump Seeks to Remove Powell, Opposing or Extending His Fed Term

President Donald Trump’s prolonged campaign to remove Jerome Powell may ultimately extend the Federal Reserve Chair’s tenure at the central bank.

Last week, Powell stated that if Kevin Wirth, Trump’s nominated successor, is not confirmed by the Senate before Powell’s term ends in May, he intends to continue serving as acting chair of the Fed.

On Wednesday, Powell told reporters, “That’s what the law requires.” He pointed to historical precedents, including when he was nominated by former President Joe Biden as a second-term chair, and the Senate delayed confirming his appointment.

Powell also for the first time said he would not resign from the Federal Reserve Board of Governors until the Department of Justice investigation into the Fed and Powell personally is resolved.

After last Wednesday’s Fed policy meeting, Powell said, “I have no intention of leaving the Board until the investigation is thorough, transparent, and conclusive.”

This triggered another round of fierce criticism from Trump. Trump repeatedly criticized Powell for not cutting rates quickly enough and often threatened to fire him. After that meeting—facing soaring oil prices and concerns about the labor market— the Fed kept rates unchanged, and Trump called Powell “incompetent” and “perhaps dishonest.”

“He should cut rates,” the president said. “Who wouldn’t cut rates?”

Disrupted Timeline

Tensions between the Fed and the government peaked in January when the Department of Justice, led by District of Columbia Prosecutor Jennina Piro, launched a criminal investigation into Powell over cost overruns in the Fed’s Washington headquarters renovation.

This month, a federal judge dismissed two subpoenas issued to the Fed by the Department of Justice, effectively invalidating the criminal investigation and marking a major victory for Powell. Piro has indicated she will appeal.

This case not only caused Powell to reconsider when he might fully step down from the Fed but also hindered Wirth’s confirmation process. A key Republican senator supporting Wirth has vowed to block his confirmation until the Powell investigation is resolved.

Therefore, despite Trump’s comments and his administration’s efforts to force Powell to resign early, the outcome may be to extend his term. Powell’s chairmanship will end in less than two months.

Crishna Guhar, head of global policy and central banks at Evercore ISI, said, “The irony of the subpoena drama is that it may ultimately succeed in creating a shadow Fed chair… and that person is Jay Powell.”

Jim Braid, former St. Louis Fed president and current dean of Purdue University’s business school, said he believes Powell is likely to remain on the Board after his term ends.

Braid said, “I think he wants to protect the Fed’s independence, and I think that will weigh heavily on him.” “The government could reach some sort of agreement, but they seem reluctant. So, for now, I expect he will stay.”

At the end of this week, the long-running Trump-Powell saga took another turn. The John F. Kennedy Library Foundation announced that Powell will be awarded the John F. Kennedy “Courage Archive” Award in Boston on May 31, in recognition of his defense of the Fed’s independence. The award is given annually to public officials who make brave decisions based on conscience, regardless of personal or professional consequences.

The foundation stated in a release, “Despite relentless political pressure and unprecedented attempts to influence the Fed, Jerome Powell remains committed to maintaining the institution’s independence and the country’s economic stability.”