①Deutsche Bank On Tuesday, the bank stated that Federal Reserve chairs can remain on the Board of Governors after their terms expire, noting that Powell might do so; ② Analysts at the bank pointed out that if the political environment is perceived as threatening the Fed's independence in setting monetary policy, Powell might choose to follow the example of former Fed Chair Eccles.
US President Donald Trump said last Sunday that he had identified Jerome Powell as his successor to Federal Reserve Chairman Jerome Powell. This brought the Fed back into the market spotlight. On Tuesday, Trump further stated that he plans to announce his choice early next year.
Deutsche Bank said on Tuesday that Federal Reserve chairs can remain on the board of governors after their terms expire, noting that Powell might do so .
“The market generally believes that once the chairman’s term ends, even if he still has several years left as a governor, he will completely withdraw from the Federal Reserve. This view is in line with traditional practice, but it has no legal basis,” said Jim Reid, an analyst at Deutsche Bank.
“That’s exactly what’s interesting. Powell’s term as chairman ends in May 2026, but his term as a member of the Board of Governors will continue until January 2028. Legally, he has the right to remain in office. Of the 15 Fed chairs in history, only two chose to remain on the Board of Governors after leaving office—their experience provides an important reference point for Powell’s decision,” Reid added.
The first was Charles Hamline, the first chairman of the Federal Reserve. He took office in 1914 and remained as a member of the Board of Governors for another twenty years after his term expired in 1916.
“As a career civil servant, Hamlin’s motivation stemmed from loyalty to the institution; he believed that mission was far more important than title. The second—and more relevant—precedent is Marina Eccles,” Reid said.
He stated that after leading the Federal Reserve through the Great Depression and World War II, Eccles stepped down as Chairman of the Federal Reserve in 1948. However, he did not resign but chose to remain on the Board of Governors. Although then-President Truman replaced him as Chairman, he invited him to continue on the Board, partly because Eccles was highly respected by the markets, and partly because the President knew he had no power to force Eccles to leave the Board. Eccles chose to remain to uphold the independence of the Federal Reserve.
Reid pointed out that "Powell may face a similar situation in 2026."
"If the political environment is perceived as threatening the Fed's independence in setting monetary policy, he (Powell) might choose to follow Eccles' approach. By remaining on the board, he would have a vote on the Federal Open Market Committee (FOMC), although this has not been done for decades. This (what Powell ultimately does) will largely depend on the government's nominee for the next Fed chair."
Since Trump began his second term, he has repeatedly urged current Federal Reserve Chairman Jerome Powell and the Federal Reserve to cut interest rates significantly, and has even threatened to fire Powell. Faced with Trump's attacks and threats of dismissal, Powell has repeatedly stated that he will not resign and will remain in his post until the end of his term. However, he has repeatedly refused to disclose whether he will step down as a Federal Reserve governor next May when his four-year term as chairman expires.
Whether Powell will completely leave the Federal Reserve is being closely watched by Wall Street. U.S. Treasury Secretary Bessant previously suggested that Powell should step down from the Federal Reserve Board of Governors when his term as Chairman ends. He stated, "If a former Federal Reserve Chairman continues to serve on the Board, it could be very chaotic for the markets."
(Article source: CLS)
