With characteristic directness, President Trump has expressed dissatisfaction in recent weeks with the job performance of Federal Reserve Chair Jerome Powell. Serious or not, this kind of talk has investors speculating on what’s next for the US central bank and what a changing of the guard could mean for the economy and markets — whether that change comes at the end of Powell’s term as chair in May 2026 or sooner.
Regardless of when Powell leaves, it makes sense for investors to explore the potential scenarios for his eventual successor and how new leadership could shape US monetary policy, particularly the Fed’s ongoing fight against inflation.
The White House has already begun considering candidates and seems keen to pick a chair who will pursue more accommodative policy. The resulting tension has raised questions about political influence on the Fed’s independence.
To be clear, we are not predicting that Powell will leave before his term expires. Rather, we are using scenario planning analysis to prepare for different outcomes including tail risks that could move markets.
Roadblocks to reducing the Fed’s independence
Given that Trump himself nominated Powell as chair in 2017, investors should be wary of making assumptions about how a new pick will govern. The Senate confirmation process offers some protection against unconventional nominees taking over the Fed board, especially given how financial markets and the public are likely to react to such a scenario. In Trump’s last term, three of his Fed governor picks were not confirmed: Herman Cain, Stephen Moore and Judy Shelton.
Although Powell’s current role as Fed chair expires in May 2026, he has the option to remain on the seven-member board of governors until January 2028. In addition, there are five voting members of the Federal Open Markets Committee (FOMC) from regional Fed banks who are appointed by their individual districts. The Fed board has the power to re-elect Powell as chair of the FOMC, which sets interest rates. They could do so regardless of whom the Senate confirms as board chair, although such a move would be unprecedented.