Will Jerome Powell stick around at the Fed? Here’s what insiders told us

Washington (CNN) — Federal Reserve Chair Jerome Powell is no stranger to tough decisions, but now he faces one of his toughest and most personal calls yet: Leave the stage or stick around in a supporting role once his replacement takes the helm of the US central bank.

Powell’s term as Fed chair expires on May 15, but his separate term on the Fed’s powerful board of governors doesn’t lapse until January 2028.

The succession drama at one of the most powerful institutions in the world has sparked a new guessing game in Washington and on Wall Street: Will Powell stay, now that the Justice Department has dropped its extraordinary investigation into him?

It’s a pivotal subplot of Wednesday’s Fed meeting and press conference, where Powell could reveal his plans, or at least drop hints.

Normally, this isn’t much of a debate: The leader of the Fed typically exits once their four-year term expires, even though technically they can hang around as a governor and continue voting on interest rate decisions.

But these aren’t normal times.

Fed independence, a tradition that Powell views as paramount and that has real-world implications for inflation-weary Main Street, has come under relentless attack during President Donald Trump’s second term.

Remaining at the Fed, albeit in a lesser role, could protect Powell from the Trump administration’s efforts to criminally charge him. And Trump wouldn’t be able to swiftly fill Powell’s seat with someone who may be more open to chipping away at the Fed’s cherished independence and lowering interest rates.

That’s why some of Powell’s former colleagues and Fed watchers suspect he will break from recent history, they told CNN. If Powell stays on the board, he would be the first Fed chair since 1948 to remain at the central bank.

“I would expect him to be torn – wanting to leave on a personal basis (he looks worn out) but also wanting to protect the integrity of the institution,” Bill Dudley, a former top Fed official who served with Powell during the first Trump administration, told CNN in an email. “My best guess is that he’ll stay on for a time – but measured in months, not years.”

‘Well and truly over’

In March, Powell said he had not decided whether to leave when his successor is confirmed. But he stressed this decision would be based on “what I think is best for the people we serve.”

“I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality,” he said at a press conference.

But it’s still debatable whether that criteria has been met, especially given the mixed messages from administration officials.

Last week, Jeanine Pirro, the US Attorney for the District of Columbia, announced she is closing the criminal investigation of Powell over the Fed’s costly renovation project.

That was enough for Republican Sen. Thom Tillis on Sunday to drop his opposition to Powell’s likely replacement, Kevin Warsh, setting the stage for a Wednesday vote to advance the nomination.

However, the legal matter does not appear to be closed altogether.

The investigation will now continue to be handled by the Fed’s inspector general. Pirro said her office will review the IG’s report and she noted that a criminal probe could be restarted, if warranted.

“Powell chooses his words carefully and I don’t see the DOJ announcement as meeting his standard (for leaving the Fed),” said Narayana Kocherlakota, a former Fed official who overlapped with Powell at the Fed and who’s now a finance professor at the University of Rochester.

Mixed messages

Trump warned earlier this month that he would “fire” Powell if he stayed at the Fed – a move that would likely face a lengthy legal challenge.

However, White House press secretary Karoline Leavitt struck a very different tone just two weeks later.

Asked on Monday if Trump would oppose Powell remaining on the Fed board, Leavitt said: “I think the president will be satisfied once Kevin Warsh is confirmed as the Fed chair.”

‘It’s the last card Powell has to play’

Jon Hilsenrath, who was known as the “Fed Whisperer” when he was a Fed reporter at The Wall Street Journal, said it looks like Powell will wait until the legal matter is truly resolved.

“As long as he is a Fed governor, he has leverage. It’s the last card Powell has to play against a president who has had it in for him for many years,” Hilsenrath, now a senior adviser to financial services firm StoneX, told CNN in a phone interview.

Hilsenrath argued that Powell would prefer to exit. Powell, who is 73 years old, is a former private-equity executive and has been at the Fed since 2012.

“He doesn’t need the money…I strongly believe he would like nothing more than to walk out to the sunset and start a new chapter in his life,” Hilsenrath said. “But Powell may think it’s in the best interest of the institution to demonstrate he won’t be pushed around or bullied.”

A smooth transition?

If Powell decides to stay as a governor, it wouldn’t be unprecedented.

The last time a Fed chair decided to stick around was in 1948: Marriner Eccles remained on the board for three years after his term as chair ended.(Coincidentally, one of the Fed buildings at the heart of the criminal investigation into Powell is named after Eccles.)

Even if it’s not unprecedented, Powell’s presence could potentially complicate the transition to the new Fed chair by confusing investors and the public about who is really calling the shots.

However, Benson Durham, a former senior Fed staffer, argued it’s not in Powell’s “DNA” to be an outspoken Fed governor with confrontational speeches and awkward dissenting votes.

“His motivation would be to protect Fed independence, not to be a pain in the a**,” said Durham, who is currently an adjunct professor at NYU.

Durham added that it could even help Warsh if Powell stuck around to ease the transition.

“The best outcome for everyone would be for Powell to stay for a few meetings – and vote with Warsh,” he said. “It would make for a smooth handoff.”

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