U.S. Federal Reserve Chair Jerome Powell begins two days of congressional testimony on Tuesday under fire from President Donald Trump for not cutting interest rates but with his status as head of the central bank seemingly secured from any presidential action by a Supreme Court ruling last month.
Trump has mused about firing Powell or naming a successor soon, in what some analysts see as an effort to influence monetary policy through a "shadow" Fed chair even before Powell leaves office in May 2026.
However the Supreme Court's acknowledgment last month that the Fed has a unique status, with its seven governors immune from removal over policy disagreements, has highlighted not just that Powell will serve out his term, but that Trump may be able to appoint only one additional board member before leaving office in January 2029.
The risk of naming a Powell replacement early, months before a board seat opens in January, and months after that until Powell departs, could be greater than any influence a chair-in-waiting might have, Evercore ISI vice chair and former New York Fed official Krishna Guha wrote recently.
"Nominating the next Fed chair now with the expectation that this person would be an active alternative voice on monetary policy for the best part of a year would confuse the market...in ways that would not help advance rate cuts," Guha wrote. "The intended nominee...would be unable to exercise real influence on policy for some time, and could lose credibility critiquing a Committee he would need to manage upon taking over."
Any missteps could also complicate Senate confirmation.
Powell starts his twice-yearly round of Capitol Hill hearings on Tuesday before the House Financial Services Committee with many policymakers reluctant to cut interest rates, despite Trump's public demands, until the administration's back-and-forth debate over tariffs is resolved and there is more clarity about how they may influence inflation, growth and jobs.
So far, though, oil prices have remained steady.
STATUTORY LIMITS
Whatever Trump thinks the Fed should do, the ranks of policymakers are all but settled, absent unexpected resignations.
To limit how much change a president can make at the Fed in any four-year term, and thus cap political leverage over interest rate decisions that can have electoral consequences, Congress sets Fed governors' terms at 14 years, with expirations staggered every two years. The chair's term runs on a separate four-year schedule to give every president the chance to name the central bank's powerful head.
While his chair term expires next May, Powell's Fed board term expires in 2028, though he may well follow precedent and leave the Fed once his time as chair is over. That means Trump has only two certain vacancies to fill in his term, Powell's and another seat held by Governor Adriana Kugler, appointed by former President Joe Biden, that expires in January.
Two other board members, Vice Chair for Supervision Michelle Bowman and Governor Chris Waller, were appointed by Trump in his first term. They are now as insulated from pressure as the others, and have joined a series of unanimous votes this year to keep interest rates steady, though both recently said a cut as soon as July may be appropriate.
Interest rates, though, are set at meetings that include the 12 regional Fed bank presidents, five of whom vote on rates in any given year. They are even further outside of presidential control, hired by the boards of directors of what are quasi-private institutions established more than a century ago to ensure regional input into national monetary policy.
While a chair or a president could veto a given candidate to run a reserve bank, terms of only three of the 12 expire before Trump leaves office, and none until 2028. The rest are under terms extending into the 2030s.
FOCUS ON THE MISSION
Former and current Fed officials talk about the pull of the institution on those inside it. Each of eight annual meetings involves extensive staff and other briefings on the state of the economy and the outlook. Officials also shape their views from interviews with business and community leaders, the regular cycle of data from government statistical agencies, and the almost constant chatter of colleagues expressing their opinions in public.
Markets play a role as well, voting daily on emerging Fed policy through the pricing of bonds, stocks, and contracts tied directly to the Fed's policy rate.
For actual policymakers, let alone "shadow" officials not acting in any formal capacity, there's not much room to hide, a sea change from the days when former Chair Alan Greenspan tightly controlled the Fed's sometimes cryptic messaging.
"We have 19 members, all of whom are pretty confident and opinionated. One thing that we get very well conditioned to do is to listen attentively to the opinions of the many people who think that there are things we could do differently and better, but then still try to make the right decision," Richmond Fed President Tom Barkin told Reuters. "I think we're well conditioned to focus on the mission and not focus on the noise."
