Will he stay or will he go? With criminal probe over, Fed Chair Powell faces big decision

• U.S. Attorney referred the criminal investigation to the Fed's inspector general, removing the Justice Department from the probe and resolving a matter Powell said he would wait on before deciding his future
• If Powell leaves, Trump would gain the ability to appoint three of seven Board of Governors members (including Warsh), raising concerns about political interference with Fed independence
• Analysts at Evercore ISI believe Powell may stay on as governor for several months to 'avoid any impression of a de facto plea deal or exit under pressure' and to safeguard the institution during the transition

Summary: Fed Chair Powell's Future in Question Following End of Criminal Probe

Federal Reserve Chair Jerome Powell faces a critical decision about his future at the central bank following the Justice Department's Friday announcement that a criminal investigation into Fed headquarters renovations has been referred to the Fed's inspector general. Powell had previously vowed to remain until the probe was resolved.

Key Decision Points:

Powell's term as Fed Chair ends May 15, with his governor term extending until January 2028. He must now choose whether to follow historical precedent and leave entirely or remain as a governor for up to two additional years.

Political Context:

President Trump has indicated he will fire Powell if he doesn't voluntarily resign. Trump's designated successor, Kevin Warsh, faces Senate confirmation but previously encountered delays due to Sen. Thom Tillis (R-N.C.) blocking committee votes pending investigation completion. Warsh has been criticized by Democrats as potentially compromising Fed independence.

Market Implications:

Analysts at Evercore ISI suggest Powell may stay temporarily to avoid appearing to exit under pressure and to protect institutional integrity. However, Jefferies' David Zervos believes markets would react positively to Powell's departure, expecting lower yields and higher bond prices.

If Powell departs, Trump could appoint another governor, giving him three appointees on the seven-member Board (including Warsh, plus current Governors Waller and Bowman). A politically-compromised Fed could face investor skepticism regarding rate cuts.

Next Steps:

Powell will address the situation at his Wednesday press conference following the FOMC meeting. The timing comes at a "delicate time" for monetary policy, making his decision particularly significant for markets and the institution's independence.