Breaking! Major Change at the Federal Reserve! Powell Issues a "Threat"

The sudden news of a major change in the Federal Reserve Chairmanship.

According to the latest publicly released documents, Fed Chair Jerome Powell’s private lawyer sent a firm message to the Trump administration: if the criminal investigation into his overspending case continues, he will remain on the Federal Reserve Board until 2028 after his term ends in May this year.

For financial markets, there is no precedent for a former Fed Chair and the current Chair serving simultaneously. Wall Street analysts note that, given the Department of Justice’s appeal and government statements in declassified documents, the likelihood of Powell remaining in office after May 15 has increased.

Additionally, the confirmation process for Kevin Warsh, the Fed Chair candidate nominated by President Trump, may also face obstacles. Key Republican senator Thom Tillis warned he intends to block the nomination until Powell’s investigation is resolved.

Notably, this week will be a “Super Central Bank Week” for financial markets. According to the schedule, the Fed, European, UK, and Japanese central banks will release their interest rate decisions intensively. Currently, markets expect the Fed to keep rates unchanged, but the updated dot plot may show only one rate cut in 2026, possibly below previous market expectations.

Powell Sends a “Threat”

According to newly declassified court documents, Powell’s private lawyer conveyed a clear signal to federal prosecutor Jeanine Pirro: if the criminal investigation into Powell continues, he will not voluntarily leave the Fed Board after his May term ends, and his seat could be retained until January 2028.

Powell’s term as Fed Chair will end on May 15 this year. Typically, departing Chairs vacate their seats when their successors are sworn in.

However, Powell’s statutory term as a Fed Board member extends until January 2028. If he chooses to stay, he will continue to serve as a voting member of the Federal Open Market Committee (FOMC) throughout the midterm elections and into the last year of Trump’s second term.

TD Cowen analyst said that, given the Department of Justice’s appeal and government statements in the declassified documents, the chances of Powell remaining after May 15 have increased.

Some also believe Powell’s continued tenure could help stabilize market expectations. RSM Chief Economist Joe Brusuelas stated that extending Powell’s term might reassure markets. He emphasized that Fed independence is an essential condition for modern U.S. economy, and weakening it would not serve American economic interests.

The declassified documents reveal details of the confrontation during the January 29 meeting.

Powell’s lawyer conveyed four points to federal prosecutor Jeanine Pirro: Trump lacks enough Senate votes to confirm a new Chair; Powell believes maintaining Fed independence requires him to stay in office; he will not give up his seat if the investigation is ongoing; but if the investigation is dropped, the outcome could be different.

The U.S. Department of Justice characterized this exchange as “pressure” on the prosecutor.

This investigation stems from a June last year hearing before the Senate Banking Committee, where Powell discussed the $2.5 billion Washington headquarters renovation budget overruns. By the end of 2025, the U.S. Attorney’s Office launched a grand jury investigation to determine whether the overrun constituted fraud and whether Powell made false statements to Congress.

On January 9 this year, the Department of Justice served a subpoena on the Fed, threatening criminal charges against Powell for testifying before the Senate Banking Committee in June 2025 about the Fed’s office renovation project.

Powell previously publicly countered, saying the threat of criminal charges was because the Fed sets interest rates based on public interest, not presidential preferences.

U.S. Judge Dismisses Subpoena Against Powell

According to CCTV News, on March 13, a federal judge in the U.S. stated he would dismiss the Department of Justice’s subpoena to Powell, citing “almost no evidence.”

James Boasberg, Chief Judge of the U.S. District Court in Washington, wrote in a court document: “Extensive evidence indicates that the government issued these subpoenas to pressure the Fed Chair (Powell) to support rate cuts or to force his resignation.”

Boasberg stated that the court found these subpoenas were issued for improper purposes and has now decided to revoke them.

In response, Prosecutor Jeanine Pirro announced she would appeal.

The appeal process means that the confirmation of Trump’s Fed Chair nominee Warsh will face further delays.

Key Republican senator Thom Tillis reiterated on Friday that the Department of Justice’s appeal would only further delay Warsh’s confirmation as the next Fed Chair. He vowed to block the nomination until Powell’s investigation is resolved.

Pirro said at a Friday press conference that the court’s ruling was “lawless” and announced the Department of Justice would appeal. She accused Powell of currently enjoying immunity, which prevents the office from investigating the Fed.

When asked whether the appeal would further hinder Trump’s Fed Chair nomination, Pirro dismissively said she only cares about the legal aspect; “the rest is just noise.”

According to media reports, White House spokesperson Kush Desai stated that Warsh’s academic background, private sector experience, and previous tenure at the Fed make him fully qualified to be the next Fed Chair.

He emphasized that the White House is working closely with Congress to quickly confirm the nomination and restore public confidence and credibility in the Fed.

Since January 2025, relations between Trump and Powell have been increasingly strained. Trump has repeatedly criticized Powell for not cutting rates significantly and has pressured him in various ways, repeatedly demanding his resignation.