U.S. Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee (FOMC), at the Federal Reserve in Washington, D.C., U.S., March 18, 2026.
Kevin Lamarque | Reuters
Federal Reserve Chair Jerome Powell is likely in his final weeks at the central bank helm and now faces a choice, following a Justice Department decision Friday, of whether he stays on at the institution.
U.S. Attorney Jeanine Pirro announced in a social media post that she was referring a criminal probe into renovations at Fed headquarters to the central bank’s inspector general, effectively removing the Justice Department from the investigation for now.
While a significant move on its face, it’s even more important as Powell has vowed to stay on until the criminal probe is resolved.
Now that a decision has been made he faces a choice: Does he follow historic precedent and walk away from the Fed, as most other prior chairs have done, or stay on for the final two years of his term as governor?
The decision could have important ramifications for policymaking at an especially delicate time.
“Powell has kept his cards close to his chest. If the investigation had never taken place we think he would have left the Fed completely on May 15,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said in a note. “But, we think the DoJ move may well have come too late – and the threat of restarting the probe is too inconclusive – for Powell to leave on May 15.”
Instead, Guha reasoned, Powell may stay on for a time even if he doesn’t fill the full governor’s term that expires in January 2028.
President Donald Trump has threatened to fire Powell if he doesn’t leave on his own after his term as chair expires.
Issues at stake
At the heart of the matter is the perceived threat to the Fed’s immunity from political interference. Trump has been vocal like none of his predecessors when it comes to badgering the central bank, demanding lower interest rates while threatening to fire Powell and actively trying to remove Governor Lisa Cook.
Powell’s designated successor, Kevin Warsh, has been criticized by some congressional Democrats as a Trump loyalist who could further compromise the Fed’s veneer of independence. Warsh had a confirmation hearing this week, but Sen. Thom Tillis, R-N.C., had vowed to hold up a committee vote until the criminal investigation was completed.
“Our hunch is Powell will stay on as a regular Fed governor for some months in order to avoid any impression of a de facto plea deal or exit under pressure,” Guha said. “Warsh’s provocative talk of ‘regime change’ at the Fed likely also increases the likelihood Powell stays for a period to try to safeguard the institution and its staff.”
A Fed spokesman declined comment on Powell’s plans.
If Powell leaves now, he will give Trump an opening to appoint another member to the Board of Governors. Counting Warsh, the president would have three appointees on the seven-member board, including Governors Christopher Waller and Michelle Bowman from his first term.
Markets are watching
While the Federal Open Market Committee requires a voting majority to change interest rates, a board majority does carry some limited influence over policy and personnel.
At the same time, if investors view the committee as politically compromised, they could look unfavorably at rate cuts.
However, David Zervos, chief market strategist at Jefferies, said Friday he thinks Wall Street would take a positive view of Powell leaving now. Zervos himself was interviewed for the Fed chair position but did not make it to the final group.
“A statement by Jay saying he’ll be leaving at the end of his term as chair, will actually cause the market to go up, the rates market to be more positive, meaning lower yields, higher prices,” Zervos said during a CNBC interview. “That will be a more significant impact than this lawsuit being dropped.”
Powell will get a chance to address the issue Wednesday when he holds his usual news conference after the FOMC meeting.
Though Powell thus far has been tight-lipped about his intentions, markets will be watching the matter closely, while it monitors the Senate’s moves towards confirming Warsh. The incoming chair has indicated a preference for lower rates as well as a rethink of other Fed operations.
“There will be a lot of power that comes with Kevin’s job,” Zervos said. “He can change the way a lot of things work around the table.”
