Powell plans to stay on Federal Reserve Board

Washington: Jerome Powell said Wednesday he plans to remain on the board of the Federal Reserve after his term as chair ends next month “for a period of time, to be determined,” saying the “unprecedented” legal attacks by the Trump administration have put the independence of the nation’s central bank at risk.

“I worry these attacks are battering this institution and putting at risk the things that really matter to the public,” Powell said in remarks at a press conference after the Fed announced its decision to keep its benchmark interest rate unchanged.

Powell’s decision to stay — the first time a Fed chair will remain on the board as a governor since 1948 — denies President Donald Trump a chance to fill a seat on the central bank’s seven-member governing board with his own appointee. The Senate Banking Committee earlier approved Powell’s successor as chair, Trump appointee Kevin Warsh, on a party-line vote. Powell will continue serving as a Fed governor, possibly until January 2028. Warsh, if confirmed, will take a seat currently held by Stephen Miran, a previous Trump appointee whose term ended in January.

Powell’s move could make it somewhat harder for Warsh to engineer the rate cuts Trump has demanded — and that Warsh advocated last year — economists say.

“It probably means it will take Warsh a little bit longer to build the consensus he is trying to build,” said David Seif, chief economist for developed markets at Nomura, an investment bank.

U.S. Attorney for the District of Columbia Jeanine Pirro said on X on Friday that her office was ending its probe into the Fed’s extensive building renovations because the Fed’s inspector general would scrutinize them instead. She added, however, that her office could reopen the investigation if “the facts warrant doing so,” and reiterated a previous statement that she would appeal a court ruling that threw out subpoenas her office had issued.

Powell said Wednesday he had been assured by the Justice Department that the appeal would not result in a reopening of the probe unless a separate investigation by the Fed’s inspector general finds evidence of criminal activity.

Apparently, that did not provide Powell with the closure he said is needed.

“I’m waiting for the investigation to be well and truly over, with finality and transparency,” he said. “I’m waiting for that, and I will leave when I think it appropriate to do so.”

The Fed on Wednesday left its benchmark interest rate unchanged for the third straight meeting but signaled it could still cut rates in the coming months, a decision that drew the most dissents since October 1992. Three officials dissented in favor of removing the reference to a future cut, while a fourth, Miran, dissented in favor of an immediate rate cut.

The dissents underscore the level of division on the Fed’s 12-member rate-setting committee ahead of the end of Powell’s term as chair on May 15.

“Developments in the Middle East are contributing to a high level of uncertainty about the economic outlook,” the Fed said in a statement after its two-day meeting. “Inflation is elevated, in part reflecting the recent increase in global energy prices.”

Trump responded to Powell’s decision late Wednesday on his social media website, writing: “Jerome ‘Too Late’ Powell wants to stay at the Fed because he can’t get a job anywhere else — Nobody wants him,” using his nickname for the Fed chair.

Warsh has promised “regime change” at the central bank and may pursue sweeping changes to its economic models, communications strategies, and balance sheet. He has argued in favor of rate cuts, as Trump has demanded, but may find it harder to implement them with inflation topping 3%, above the Fed’s 2% target.

Asked whether he believed Warsh would stand up to political pressure from Trump, Powell said, “He testified very strongly at his hearing, and I take him at his word.”

The three officials who dissented against signaling potential rate cuts were Beth Hammack, president of the Federal Reserve Bank of Cleveland; Neel Kashkari, president of the Minneapolis Fed; and Lorie Logan, president of the Dallas Fed. Regional Fed bank presidents have historically been more likely to dissent, while Washington-based governors more often support the chair.

The dissents could renew tensions between the Trump administration and the regional bank presidents, whom White House officials have previously criticized.

Beth Ann Bovino, chief economist at U.S. Bank, said the dissents demonstrated that Fed policymakers are “very independent” and suggested rates could remain on hold for months longer. She had forecast a rate cut in December but is now unsure. Wall Street investors, on average, do not expect a reduction until well into next year, according to futures pricing.

Powell’s decision to remain on the board could worsen tensions with the Trump administration and create what some analysts describe as a “two Popes” scenario, with a chair and former chair both serving on the Fed’s board. In such a case, divisions among policymakers could deepen if some choose to follow Powell’s influence rather than Warsh’s.

Powell dismissed the idea that his presence would cause dissension, saying, “My intention is not to interfere,” and later adding, “I’m not looking to be a high-profile dissident or anything like that.”

Still, Powell said he remains concerned about the Fed’s independence from the White House, which he said is essential to setting rates in the public interest rather than responding to political pressure. Over time, Fed interest-rate decisions affect the cost of mortgages, auto loans, and business borrowing.

Fed independence remains “at risk,” Powell said. “We’re having to resort to the courts to enforce our ability to make monetary policy without political considerations. We’ve had to do that and we’ve been successful so far, but that’s not over — none of that has concluded yet.”

The unusual circumstances come as the economic outlook remains murky, putting the Fed in a difficult position. Inflation has jumped to 3.3%, a two-year high, as the war has sharply raised gasoline prices, making it harder for the central bank to cut rates. The Fed typically holds rates steady or raises them when inflation is worsening.

At the same time, hiring has nearly stalled, leaving job seekers frustrated by the difficulty of finding work. The Fed typically cuts rates when the labor market weakens to encourage spending and job growth.

Layoffs, however, remain low, as employers appear to be following a “low-hire, low-fire” strategy. Many Fed officials have said that as long as unemployment remains low, the central bank does not need to cut rates to stimulate hiring. The unemployment rate declined to 4.3% in March from 4.4%.