Powell Is Staying at the Fed, With Trump Appointments Possibly Limited

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U.S. Federal Reserve Chair Jerome Powell is set to begin two days of congressional testimony on Tuesday, facing pressure from President Donald Trump over interest rates. Despite Trump's repeated calls for rate cuts and musings about replacing him, Powell's position appears secure due to a recent Supreme Court ruling.


Last month, the Supreme Court acknowledged the unique status of the Federal Reserve, confirming that its seven governors are immune from removal over policy disagreements. This ruling reinforces that Powell is likely to serve out his term, which ends in May 2026. Experts like Krishna Guha, vice chair at Evercore ISI and a former New York Fed official, suggest that attempting to name a successor prematurely, before a board seat opens or Powell's term concludes, could create market confusion and actually hinder the goal of achieving rate cuts.


Powell's semi-annual Capitol Hill hearings, starting with the House Financial Services Committee, will likely see him address policymakers who are hesitant to cut interest rates. This reluctance stems from the ongoing uncertainty surrounding the administration's tariff policies and their potential impact on inflation, economic growth, and employment.


The recent U.S. bombing of Iran and the broader conflict between Iran and Israel could also be a factor in Powell's testimony. While oil prices have remained relatively steady so far, any escalation leading to rising oil prices could influence the Fed's economic outlook, which has already been revised towards slower growth and higher inflation since the Trump administration initiated its tariff campaign. The current situation in the Middle East, including a potential "complete and total" ceasefire between Israel and Iran as announced by President Trump, will undoubtedly be a topic of interest for lawmakers and a consideration for the Fed's future monetary policy decisions.