What will happen if Powell doesn't go?The Fed's progress also casts doubt on markets and the dollar

Powell's presidential term expires on May 15.However, his seat on the Board of Governors is safe until 31 January 2028. In nearly half a century, no central bank governor has chosen to remain on the Board after leaving the presidency.

What will happen if Powell doesn't go?The victory at the Fed reopens doubts about the market and the dollar

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Powell's term as president ends on May 15. However, his seat on the board is guaranteed until January 31, 2028. In nearly half a century, no central bank president has decided to remain on the board after leaving office.

The criminal investigation launched by the Department of Justice against Jerome Powell has put the Federal Reserve (FED) in front of an unusual unknown.It is not just about who will be the next head of the central bank.In Washington and the markets, the question is beginning to circulate whether Powell will leave the institution entirely in May or continue as governor until 2028.

Powell's term as president ends on May 15.Seats on the governing council, on the other hand, are guaranteed until January 31, 2028. The legal architecture of the Fed allows this continuation, although historical practice points in the opposite direction.In almost half a century, no central bank president has chosen to remain on the board after leaving the presidency.

Research has changed that balance.Various central bank observers explain that the legal process is a condition for this decision.If Powell remains governor, the White House will be unable to form a similar majority on the council, delaying greater political control of the institution for years.

Powell himself linked the investigation to monetary policy decisions, noting in a public statement that "the threat of criminal charges is a direct result of the Fed setting interest rates based on its technical analysis, not the preferences of the executive."

Trump de-escalated the situation

President Donald Trump, for his part, tried to ease the pressure in the short term.In an interview with Reuters, he confirmed that there are no plans to remove Powell despite the ongoing investigation.This statement immediately affected the markets.The dollar halted its decline, US bonds found stability and Wall Street moderated the volatility recorded in the previous days.

In nearly half a century, no central office holder not elected to lose in the House of York left the presidency.

Relief is evident in credit markets.Yields on the 30-year US Treasury note rose earlier in the session.It held steady at around 4.8%. The move differs from the April 2025 crisis when new tariffs were announced by the White House.This results in the selling of bonds, stocks and the dollar.

The prelude to 2025 still stands

During this episode, the long-term benchmark approached 5%, a level that the market continues to see as a relevant threshold.So the trigger was commercial.In January 2026, the main focus is on monetary management.The model has similarities.In both cases, the most pronounced response occurred in the long part of the curve, increasing the yield needed to finance the United States over a long period of time.

The sign is important because it does not correspond to the return of the price of life.Consumer price is 2.7%.It also does not respond to an upward revision of the growth forecast.The correction comes to the official rate of around 3.5% to 3.75%, after three cuts implemented by the Fed last year.

Risks start to pay off in the long run

With all these doubts on the table, the market is starting to introduce a corporate component to the price of US assets.In addition, the program is not limited to credit.The dollar showed weakness against major currencies, although there was no surprise component.The decline in the dollar index (DXY) initially eased after Trump's comments, but fell again in the latter part of the week.

This response is also seen in asset allocation.European debt levels have become relatively attractive, and benchmark sovereign bond prices have risen.The continent's stock markets outperformed Wall Street, with the Ibex hitting 35 all-time highs despite tensions from the United States.

The move is in response to a wave of diversification rather than a sudden change in economic prospects in Europe.Investors seek to reduce their focus in an environment where US dollars.There.Monetary policy gives significant uncertainty.

Consistency is important for a reason.The US is facing a high debt load and a demanding repayment schedule

Gold responded in parallel.The metal has set new all-time highs, with gains of more than 3% in some periods.The move is not in response to an immediate hit to inflation, but instead is aimed at looking for assets that will hold their value amid low real rates and high institutional uncertainty.

Relay and profiles in the game

Trump has publicly named a number of potential candidates to replace Powell.They include Kevin Warsh, former Fed governor, and Kevin Hassett, now head of the National Economic Council.Rick Rieder, director of BlackRock, and Governor Christopher Waller were also mentioned.The diversity of profiles increases the number of events that the market has to reduce.

Progress is important for a reason.The United States is facing a large debt burden and the need for refinancing.Any increase in long-term interest rates increases the value of Treasury bills.With persistent dissatisfaction, absorption is limited.

still to be decided

Powell has not confirmed whether he will continue as governor after May.His decision will determine the pace at which the White House could influence the composition of the Fed board and will determine market perceptions of institutions' ability to withstand major political pressures with the midterm elections and the required fiscal environment.

The risk is not a sudden reversal in monetary policy, but a gradual erosion of "credibility", emphasizes Goldman Sachs.

From JP Morgan, it focuses on market trends.When the independence of the central bank is questioned, the adjustment usually starts at the highest point of the bean, towards the dollar, and affects risky assets with a great delay.It's not a one-time surprise, it's a fixed fee.