Trump Has Said He Won’t Fire Powell, But He Looks Forward to Replacing Him Next Year

President Donald Trump says he isn’t planning to fire Federal Reserve Chair Jerome Powell—he also seems eager for Powell’s term to end.

Powell’s four-year term as the Fed chair ends in May 2026, opening up an opportunity for Trump to name a new leader to the central bank. It’s a prospect that financial markets are watching closely, as they gauge whether the new Fed chair may be more amenable to Trump’s demand for interest rate cuts.

The Fed has thus far been reluctant to cut rates, as it awaits clarity on the potential economic effects of Trump’s tariffs. That approach has angered Trump, who called Powell a “fool” in the wake of this week’s Fed meeting and at one point weighed firing him. After spooking markets, Trump has backed off any talk of firing Powell. 

“Why would I do that?” he told NBC’s Meet the Press over the weekend. “I get to replace the person in another short period of time.”

In Trump’s ideal world, the Fed chair would support more dovish policies, encouraging spending by keeping interest rates low. But markets have also long treasured the Fed’s ability to make independent decisions—including maintaining high rates when it needs to fight inflation.

It is unclear whom Trump will name as Fed chair or what approach they’d take, but reports suggest he’s eyeing three potential avenues. He may select a former Fed governor, choose from within the Fed, or pick from his own administration. 

Whomever Trump picks will be subject to Senate confirmation for a four-year term.

Kevin Warsh

One top candidate is former Fed governor Kevin Warsh, a fellow at the conservative Hoover Institution who was on the Fed’s board from 2006 until 2011.

Warsh had been a top contender for the Fed chairmanship during Trump’s first term, though Trump ultimately settled on Powell.

Warsh tended to lean hawkish while at the Fed, backing its aggressive steps to calm markets during the 2008 crash but also calling for removing that support once the fog cleared. Warsh’s historically hawkish tilt may conflict with Trump’s desires to keep interest rates low. 

More recently, Warsh has called for a “strategic reset” at the Fed, criticizing the “expansive role” it’s taken since 2008. He argued that the Fed “misjudged the economics” after COVID-19 and spurred inflation.

“When monetary outcomes are poor, the Fed should be subjected to serious questioning, strong oversight and, when they err, opprobrium,” Warsh said in a speech last month, arguing Fed officials shouldn’t be “treated as pampered princes.”

Chris Waller

Trump may also elevate Fed Governor Chris Waller, a longtime Fed economist whom Trump named to the Fed board in 2020.

Waller has taken Trump’s recent criticisms of the Fed in stride, telling Bloomberg Television that the president is “free to say whatever they want” and that “being criticized” is part of the job.

In a speech last month, he emphasized the outlook is “highly uncertain,” requiring the Fed to be flexible as economic data comes in, depending on how trade negotiations play out. But he leaned toward thinking the inflationary impact of tariffs would be temporary, thus giving the Fed more wiggle room to cut rates.

Waller acknowledged the Fed’s most recent prediction of temporary inflation—that post-COVID price surges would be temporary—proved wrong. But making a mistake “does not mean you should never think that way again,” he said.

Larger tariffs could mean that the “risk of recession would outweigh the risk of escalating inflation,” he said, which could prompt the Fed to cut rates to support growth. Smaller tariffs would likely reduce the need for rate cuts, he said. 

But given how the economy has been trending, with inflation continuing to come back down, Waller said rate cuts were “very much on the table in the latter half of this year.

Administration Officials

Trump may also opt to pick a top official in his own administration, such as Treasury Secretary Scott Bessent or economic advisers Kevin Hassett or Stephen Miran.

One downside of picking Bessent is that Trump would also need to pick a new Treasury Secretary.

Bessent has been effective at “steadying the nerves of investors” who are questioning Trump’s trade policies, according to Derek Tang, a Fed-watcher at Monetary Policy Analytics. That calming factor and market credibility “would be hard to replace,” Tang wrote in a note to clients.

But with any nominee, whether they’re from his administration or not, Trump would need to keep in mind that markets could react negatively to someone they see as a Trump loyalist, he wrote.

“The more loyal the nominee is perceived, the more unsettled bond inflation expectations might become,” Tang said, even though Fed decisions are made by consensus.

That could prompt bond investors to see the U.S. government as riskier and demand it pay higher interest rates on its debt, ultimately hampering Trump’s goal to achieve lower rates.

“Attrition of central bank independence does not have to be complete to shake confidence in U.S. institutions and assets, given preexisting overexposure to U.S. assets,” Tang wrote. “Just chipping away at it would be enough to undermine future marginal inflows and outperformance.”