Fed Chair Jerome Powell's Term Ends Amid White House Pressure

On May 15, Jerome Powell's term as Chair of the U.S. Federal Reserve officially concluded after months of strain between the White House and the central bank. President Trump had pressured the Fed to cut interest rates more aggressively than the institution was prepared to do.

Kevin Warsh, who served as a Fed Governor from 2006 to 2011, will succeed Powell. Warsh was appointed by President Trump after Senate confirmation in April, despite controversy over the central bank's independence.

Powell, first appointed by Trump in 2018, said he plans to stay on the Board of Governors after stepping down as chair to defend the Fed's independence. This statement came after Trump threatened to fire Powell if he remained at the Fed after his chair term ended.

Tensions with the Trump Administration

Powell's term during Trump's second presidency was dominated by political pressure. Trump repeatedly called for faster and deeper rate cuts, even nicknaming Powell "Too Late Powell."

Powell emphasized the Fed's independence and steadfastly rejected the president's criticism. Under his leadership, the Fed only began cutting rates last September.

Professor Babak Hafezi of American University said: "Powell's legacy is reaffirming the Fed's independence. He fought the Trump administration on lowering rates."

Beyond Trump's crude rhetoric and threats, the administration also investigated Powell over renovations to the Fed's Washington headquarters. Federal prosecutors found no evidence of wrongdoing.

The investigation prompted Republican Senator Thom Tillis to declare he would not vote for any Fed nominee until the Justice Department stopped the probe. The investigation was later suspended, and the Senate Banking Committee voted to advance Warsh's nomination.

In his final press conference, Powell stated bluntly: "I am concerned these attacks are harming the institution and threatening the ability to conduct monetary policy without regard to political factors."

Additionally, Trump fired Fed Governor Lisa Cook—appointed by Biden—over alleged mortgage fraud; appointed ally Stephan Miran; and Trump's December statement that he would only appoint people who agree with his views on rates fueled concerns about Fed independence.

During his first term, Trump criticized Powell when the Fed raised rates four times in 2018, from 1.25-1.50% to 2.25-2.50%. Trump called the Fed "crazy" on X and labeled Powell an "enemy" in August 2019.

Professor Brett House of Columbia University said: "Trump's desire in both terms is the same: lower policy rates. But there was no clear reason to cut the federal funds rate in either his first term or now."

COVID-19 Pandemic and Monetary Policy

Powell's monetary policy was notable during the COVID-19 recession. The Fed and Treasury provided direct payments to individuals under the CARES Act, rolled out loan programs like the Paycheck Protection Program (PPP), bought government bonds and mortgage-backed securities, and cut short-term rates to 0-0.25%.

By November 2020, Trump expressed satisfaction with Powell. When Powell's term ended in 2021, President Biden nominated him to continue as Fed Chair.

When inflation hit a 40-year high, the Fed raised rates to 5.5% in July 2023. Professor House noted: "Looking back, the Fed really needed to raise rates aggressively in the fastest tightening cycle in decades to combat inflation."

Before leading the Fed, Powell served as a Fed Governor appointed by President Obama in 2012. He supported reforming "too big to fail" policies and by 2017 said regulators had made significant progress on the issue.

Challenges for the Successor

Kevin Warsh, confirmed as new Fed Chair in April, faces many challenges. During his hearing, Senator Elizabeth Warren called him a presidential "puppet," but Warsh denied this.

The Fed is expected to hold rates steady until 2027, keeping them at 3.5-3.75% as prices rise 3.8% year-over-year—the largest increase since May 2023. JPMorgan predicts the next rate move will be a 25-basis-point increase in Q3 2027, contrary to the White House's desire for cuts.

CME FedWatch shows a 97% probability of no rate change at the June 16-17 meeting. This will be a major test for Warsh, who pledged independence during his hearing.

Former New York Fed analyst Skanda Amarnath remarked: "Kevin Warsh was strongly critical of the Fed considering rate cuts in 2024, but suddenly became the biggest supporter of rate cuts in 2025. There is a real risk this institution becomes more susceptible to political manipulation. Jay Powell did his utmost to shield the Fed from those pressures."