Trump Signals Powell to Remain Fed Chair, Easing Market Jitters

Former President Donald Trump has indicated he does not plan to remove Federal Reserve Chairman Jerome Powell, a move that eases investor concerns about a potential leadership shake-up at the world's most influential central bank.

In a January 14 interview with Reuters, Trump addressed speculation about Powell's future, stating, "I don't have a plan to remove him." The comment comes amid a Justice Department investigation into cost overruns at the Federal Reserve's headquarters, which has fueled uncertainty in financial markets.

While the statement signals a degree of policy continuity, Trump also added that it was "too early" to definitively comment on the Fed chair position. Powell's term as chairman is set to conclude in May 2026, though his position on the Board of Governors runs until 2028. This distinction provides a window for a potential change in leadership without an outright dismissal.

The prospect of a leadership change at the Fed has been a significant point of discussion for investors. Markets have been rattled by the idea of a more politically-aligned Fed chair, with some analysts warning that a perceived loss of central bank independence could lead to a sell-off in U.S. bonds and dollar depreciation.

Trump and Powell have had a tumultuous public relationship. After appointing him in 2017, Trump became a frequent and vocal critic of Powell's monetary policy, particularly the interest rate hikes implemented in 2018. The former president's sustained criticism raised questions about the Fed's autonomy, a cornerstone of its credibility in managing inflation and employment.

Powell, for his part, has consistently defended the central bank's independence as being essential for its dual mandate. The ongoing investigation into the Fed's renovation costs has been characterized by Powell as an unprecedented attempt to pressure him. Despite the probe and the political friction, Powell has maintained his focus on navigating the post-pandemic economy.

Before Trump's latest remarks, speculation was rife that a new administration might seek a more dovish chair who would pursue aggressive interest rate cuts. Names floated as potential successors have included former Fed Governor Kevin Warsh and former National Economic Council Director Kevin Hassett. Trump's comments cool this speculation, at least for the near term, by removing the immediate threat of a forced exit for Powell.

For investors, the statement reduces a significant tail risk. While monetary policy will continue to be debated, the immediate prospect of a politically motivated overhaul at the top of the Federal Reserve appears diminished. This allows the market to refocus on fundamental economic data—such as inflation, employment, and growth—as the primary drivers of the Fed's future interest rate decisions.