Trump fumes as Jerome Powell plots future at Federal Reserve

Federal Reserve Chair Jerome Powell is drawing backlash from Trump administration figures and allies after announcing his plans to stay at the central bank beyond his chairmanship.

Powell said Wednesday that he will remain on the Fed board for an undetermined amount of time after Kevin Warsh takes over as chair given the various legal threats he believes the bank still faces.

While Powell has pledged to keep a "low profile," top Trump allies are fuming, and some economists say it could lead to a clash on the board of governors between the new and old chair.

"The decision that Powell will make on whether to remain on the board will shape the early term of Kevin Warsh, who appears likely to receive confirmation as Powell's successor," Joe Brusuelas, principal and chief economist for RSM US, wrote in a note Wednesday.

"Should Warsh arrive at the Fed and intend to cut rates, Powell would almost surely end up dissenting if he remains on the board," he continued. "And that would in effect make Powell the shadow chair well into 2028."

Powell's term as Fed chair ends May 15, but his separate term as a member of the Fed board of governors does not lapse until Jan. 31, 2028.

The outgoing Fed chair said he plans to stay on as a governor until the probe into his handling of the bank's renovations is "well and truly over with transparency and finality."

The DOJ handed over its criminal investigation into Powell to the Fed inspector general last week, reportedly offering assurances that they would not reopen the probe unless there is a criminal referral.

While Powell said he was "encouraged" by these developments, he said he is "watching the remaining steps in this process carefully."

He also asserted that he would be on his way out of the Fed entirely if not for the criminal investigation.

"I had long planned to be retiring," Powell told reporters Wednesday. "The things that have happened in the really, in the last three months have, I think, left me no choice but to stay until I see them through."

It is rare for a Fed chair to remain at the central bank following the end of their term. The last time this occurred was in 1948, when Marriner Eccles stayed on as a governor after stepping down as chair.

Powell's decision drew immediate scorn from figures in and around the Trump administration. President Trump has long feuded with the Fed chair over interest rates, repeatedly threatening to fire him.

"Jerome 'Too Late' Powell wants to stay at the Fed because he can't get a job anywhere else — Nobody wants him," Trump wrote in a post on Truth Social.

The president appeared more nonchalant about Powell's decision while answering questions in the Oval Office on Thursday, but still seized the chance to attack him.

"I don't care. If he stays on, he stays on," he said. "That doesn't, I just wanted to make sure that Kevin became the head. It's very unusual they say. I predicted he would because you know who's going to hire him. So I predicted he would stay on. But he's a negative, I think he's a negative force."

Treasury Secretary Scott Bessent argued Wednesday that Powell's decision represents a "violation of all Federal Reserve norms."

"It's highly unusual for someone who says he's an institutionalist and cares about norms at the Fed," Bessent told Fox Business.

"I think it is an insult to Kevin Warsh, Miki [Michelle] Bowman and Chris Waller to think that these other Republican nominees do not care about the institution of the Fed and that he alone can maintain the integrity of the Fed," he added, referring to Trump's pick to replace Powell and two of his other additions to the Fed board.

Warsh, whose confirmation has been tied up in recent weeks over the Powell probe, appears poised to sail through the Senate after the DOJ closed its investigation.

The Senate Banking Committee advanced Warsh's nomination to the full chamber on Wednesday after a party line vote, and Powell congratulated his likely successor during his final post-rate decision press conference as Fed chair.

"There is only ever one chair of the Federal Reserve board," Powell said. "When Kevin Warsh is confirmed and sworn in, he will be that chair."

Despite Powell's conciliatory tone, National Economic Council Director Kevin Hassett said Thursday morning that he was "disappointed" and suggested "it's time to deescalate and move on."

"In the end, our hope is that Chairman Powell understands that the Justice Department has stood down," he told Bloomberg Television.

While Powell has said his "intention is not to interfere," his decision to stay at the bank prevents Trump from appointing another Fed governor and limits his ability to shift the committee toward rate cuts, said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank.

Warsh is widely expected to be more amenable to rate cuts given Trump's push for looser monetary policy, but will face a Fed that is reluctant to cut rates in the face of another massive war-driven supply shock.

The central bank opted to hold rates steady Wednesday in a rare 8-4 vote. Only one member of the Federal Open Market Committee (FOMC), Stephen Miran, voted for a rate cut. He was nominated by Trump to join the board last year while serving as the top White House economist.

Three others supported the Fed's decision to maintain rates at their current level but disagreed with the "inclusion of an easing bias" in the bank's statement.

"Their dissent is striking since the statement's language was not particularly dovish to begin with," Adams noted in a statement.

"The regional Fed presidents' dissent is best understood as resistance to the White House's campaign to pressure the Fed into cutting rates," he added. "They are emphasizing that the Fed will remain independent from political considerations, with or without Powell at the helm."

The war with Iran is the primary obstacle to Trump's desired rate cuts, driving inflation higher while wreaking havoc on oil markets with the effective closure of the Strait of Hormuz.

The Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index, showed Thursday that the annual inflation rate rose to 3.5 percent in March, up from 2.8 percent in February.

As inflation moves further away from the Fed's target rate of 2 percent, prospects of a rate cut are increasingly dim.

Investors appear skeptical that the central bank will cut rates at all this year. Traders see a greater than 80 percent chance that the Fed holds rates steady at each of the remaining meetings in 2026, according to CME FedWatch, a tool that tracks bets placed on future Fed interest rate moves.

Brian Gardner, chief Washington policy strategist at the wealth management and investment banking firm Stifel, said he is doubtful that Powell we be a "major hurdle" for Warsh as he "tries to steer monetary policy in a different direction."

However, he warned that the timing of Powell's eventual departure and political control of the Senate could be key in determining whether Trump can successfully replace him down the line.

"If Powell does not resign from the Board by the end of 2026 and if control of the Senate flips to the Democrats, then Pres. Trump might find himself unable to fill the seat for the remainder of his term," Gardner wrote in a note Thursday.

"[I]t could make the vote math on the Federal Open Market Committee more challenging for Warsh as he could be deprived of an additional ally on the committee," he added. "It would be a missed opportunity for Warsh and the administration."