As Jerome Powell’s tenure as Federal Reserve Chair approaches its conclusion in May 2026, discussions surrounding his potential successor have intensified. Former President Donald Trump has been especially outspoken on the need for aggressive rate cuts to lighten the government’s debt load. Beyond these legislative footholds, he might well find himself stymied if Powell chooses to remain in situ. The political climate and economic implications surrounding these discussions pose serious questions. They cast into doubt the credibility of any nominee that Trump may ultimately propose.
Jerome Powell has been the Fed Chair since February 2018. He might decide to stay a governor and not run for president again until 2028. Indeed, traditionally almost all Fed Chairs have left the Fed after their terms expire, making Powell’s intentions the subject of considerable speculation. If he decides not to resign in disgrace, Trump would still have to nominate a sitting governor to succeed him. This situation has created a political opening for fundamental reforms to the FOMC. Powell still holds one of the twelve voting seats.
Trump has been calling for the Fed to cut rates aggressively – by two percentage points or more. This latter third approach would likely increase inflationary expectations and raise Treasury yields. Thus far, no current members of the FOMC have shown an inclination to accommodate the short-cut, race-to-the-bottom—style rate cuts Trump wants. Powell and his neoliberal predecessors have long insisted that public fiscal conditions should not matter for rate-setting decisions. This difference in perspective is a window into the growing friction between fiscal policy and monetary policy.
To make matters worse, the situation is complicated by an imminent vacancy on the board of governors. Adriana Kugler’s term is set to conclude at the end of January 2026, potentially allowing for another opportunity for Trump to influence the Fed’s composition. Nominating a replacement several months before Powell’s term ends could facilitate a smoother Senate confirmation process for any prospective nominee.
Lev Menand, legal scholar and central banking expert, illustrated the consequences of having a “shadow chair.” This is an important development at this critical time of transition. “Depending on who it is, it could have no effect, really at all, on Powell’s ability to govern for the remainder of his term, or it could actually be quite disruptive,” he stated. Yet a nominee set up as a shadow chair could also weaken Powell’s power by publicly conflicting with his preferred monetary policy direction.
“But I think that it’s safe to say that depending on how it’s rolled out, it could really ultimately unsettle expectations and change how some of these dynamics unfold in the fall.” – Lev Menand
In addition, Trump has been constantly pestering Powell and other FOMC officials to cut rates. Given this constant and unforgiving pressure, it’s worth wondering what the implications could be for Powell’s leadership and decision-making approach. According to economist Dario Perkins, when things like this happen, investors get “sick to their stomach.” “Naturally, this is an idea that leaves many investors feeling uneasy,” he remarked.
The potential for a “shadow chair” makes things more complicated. On this last point, Secretary of the Treasury Scott Bessent proposed that Trump could game early nominations to manufacture just this outcome. “You could do the earliest Fed nomination and create a shadow Fed chair,” he stated. This prospect is troubling enough in terms of governance at the Fed during such a critical period.
Menand underlined the ordeal that awaits any nominee who would be expected to act as a shadow chair. He observed, “From the perspective of the nominee, there’s nothing good about being nominated far out in advance and being expected to serve as a shadow Fed chair. That can only end poorly.”