Federal Reserve Chair Jerome Powell wrapped up a largely uneventful two-day testimony before Congress this week, but uncertainty looms over his future as President Donald Trump intensifies his public attacks and signals he may soon name a successor.
During a press conference at the NATO summit in The Hague on Wednesday, Trump lashed out at Powell, calling him “stupid” and “very average mentally,” reigniting questions about the central bank’s independence as his first term nears its end.
“I think he’s terrible,” Trump said when asked about Powell, whom he originally nominated in 2017. “He has a low IQ for what he does.”
While Trump has previously criticized Powell, the remarks now carry fresh weight amid speculation that he may try to install a “shadow chair” to influence interest rate policy ahead of the 2026 end of Powell’s term as Fed chief.
Markets responded quickly. Traders raised the odds of three rate cuts this year, Treasury yields fell on the short end of the curve, and the U.S. dollar slipped against other major currencies.
Trump said he has narrowed his list of potential successors to “three or four people,” though he offered no names. Contenders reportedly include Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh, National Economic Council Director Kevin Hassett, and Fed Governor Christopher Waller, a Trump appointee seen as an advocate for looser monetary policy.
A report from The Wall Street Journal also named former World Bank President David Malpass as a possible candidate and suggested Trump may announce his pick earlier than expected.
The Fed is already navigating a complex environment. This week it eased key bank oversight rules, removing “reputational risk” from supervisory criteria and adjusting capital requirements for major institutions — moves interpreted by some analysts as aligning with Trump’s policy preferences.
However, Trump’s primary frustration remains the Fed’s decision to hold interest rates steady. Despite recent political noise, central bank officials insist their choices remain insulated from electoral pressure.
“The political waves are not a factor in decision-making,” said Chicago Fed President Austan Goolsbee. “Just look at the minutes and transcripts… They’re not about partisan politics.”
Powell’s current term as chair runs until May 2026, while his seat on the Board of Governors lasts through 2028. Analysts warn that any premature effort to install an unofficial replacement could test legal boundaries and risk destabilizing the Fed’s credibility.
Still, with Powell under fire and a presidential election ahead, the future leadership of the world’s most powerful central bank has become a growing source of tension in Washington — and on Wall Street.
Related Readings:
