Powell remains as Federal Reserve Board member, breaking decades-old tradition to counter political interference

After Federal Reserve Chair Jerome Powell concluded the last policy meeting of his term on May 15, he made a decision that breaks decades of tradition: although he’s handing over the baton, he won’t be going anywhere.

Even though Kevin Warsh, the successor nominated by Trump, has been approved by the Senate Banking Committee, Powell announced that he will continue serving as a Federal Reserve Governor until early 2028. He said bluntly that this move is to respond to what he called an “unprecedented legal assault” launched by the Trump administration, and to defend the Fed’s independence in setting policy without taking political considerations into account.

The decision was immediately mocked by Trump on social media, who called Powell “too late,” adding that once you’re out of the Fed, you can’t find a job. The public face-off turned what should have been a smooth transfer of power into a highly charged “ministers in the same hall” showdown.

Cracks appear after the swan-song meeting: 12 voted, 4 opposed, major differences over the inflation path

Powell’s “farewell performance” was far from flawless. At Wednesday’s meeting, the Fed kept the interest rate in the 3.5%–3.75% range, but 4 dissenting votes emerged among the 12 voters— the largest internal split since 1992.

• Dovish dissent: Governor Stephen Miran (Stephen Milan) said inflation is under control and argued for an immediate rate cut.

• Hawkish dissent: The three regional Fed presidents (Hammack, Kashkari, Logan) agreed to pause, but firmly opposed the statement’s tendency to keep a “more likely rate cut next” inclination.

This division leaves a difficult problem for the incoming Warsh: the inflation “clock” is at the 3% “last mile,” while colleagues are sharply split on the direction.

Warsh’s mess: the “life-or-death test” of the 2% inflation target

Although Warsh has said he will reform Powell’s old “data-driven” framework, once he takes office he will have to confront the fourth supply shock within five years (pandemic → Russia-Ukraine → tariffs → Middle East). Inflation is no longer just a simple case of demand overheating, but a structural stubborn ailment.

Officials are debating three possible scenarios, and these will determine the future direction of interest rates:

1. Optimistic scenario: The prices pushed up by tariffs are temporary, and inflation will fall on its own. (Meaning rate cuts can be prepared)

2. Neutral scenario: Current rates are actually not tight enough, so they need to be kept at high levels for longer. (Meaning rate cuts are delayed)

3. Nightmare scenario: Business sentiment has changed; companies are increasingly willing to pass costs on to consumers, and inflation persistence is higher than expected. (Meaning possible need to resume rate hikes)

Powell’s former adviser Kurt Lewis warned that if the Fed misjudges the situation— for example, blaming inflation on “special circumstances” tariffs— it will have to “face reality,” and admit that interest rates cannot rein in inflation at all.

Power struggle in the shadows: legal siege and the building renovation case

Powell’s decision to break with tradition and stay was directly triggered by legal pressure from the White House. Although the Department of Justice has just paused the criminal investigation into the “Federal Reserve building renovation project,” and the court rejected the subpoenas, Powell believes the threat has not been lifted. He claimed that he will only consider leaving after these legal attacks are “fully and transparently resolved,” otherwise the Fed’s independence will be completely undermined.

Staying on isn’t only a handover of power between two people—it is the most complex “stress test” in the Fed’s modern history.