Trump’s Fed Shake-Up May Undercut Powell’s Authority Before 2026

Trump’s Strategic Moves Put Fed Chair Jerome Powell’s Influence on the Clock

President Donald Trump is moving rapidly to reshape the Federal Reserve’s leadership, signaling a dramatic shift in U.S. monetary policy direction well before Chair Jerome Powell’s current term expires in May 2026. Through a combination of high-profile nominations, public criticism, and hints about his preferred successor, Trump is already setting the stage for what some market analysts are calling a “Phantom Fed Chair” moment — when the sitting Fed chief’s authority fades months, or even years, before the official handover.

The “Phantom Fed Chair” Effect — A Quiet Transfer of Power

In the financial community, the term “Phantom Fed Chair” describes a phenomenon where market attention shifts from the sitting chair to the individual expected to take over. In this scenario, Powell’s most powerful tool — forward guidance — could lose its punch long before the end of his tenure. The moment Trump names a successor, investor focus may pivot decisively toward that person’s views and policy outlook, rendering Powell’s remarks less impactful.

Source: X

The Kobeissi Letter, a closely followed market commentary service, recently warned that Trump could effectively make Powell “powerless” by announcing his preferred replacement. “Once markets know who will take the helm, they will trade on the future chair’s anticipated actions, not Powell’s words,” the publication noted. This dynamic has played out before in U.S. history, most notably in 1978 when President Jimmy Carter named Paul Volcker to succeed G. William Miller, leading traders to pivot immediately toward Volcker’s anticipated anti-inflation stance.

Stephen Miran Joins the Board — A Pro-Crypto and Growth-Oriented Voice

The clearest sign yet of Trump’s influence over the Fed’s future came this week with his nomination of Stephen Miran to the Federal Reserve Board of Governors. Miran, currently serving as head of the Council of Economic Advisers, will replace Adriana Kugler, who resigned unexpectedly. His term will run until January 31, 2026.

Miran is widely recognized for his supportive stance on digital assets and his advocacy for looser monetary policy in the name of fostering economic innovation. His appointment is being interpreted as a deliberate step toward aligning the Fed’s policy direction with Trump’s pro-growth agenda — one that favors earlier rate cuts and a friendlier regulatory climate for cryptocurrencies like Bitcoin and Ethereum.

Source: X

“This is not just a personnel change,” said Jennifer Walker, chief economist at Horizon Macro. “It’s a signal that Trump wants a Fed that is more responsive to growth targets, more open to crypto integration into the mainstream financial system, and less anchored to what he sees as overly cautious inflation fighting.”

Trump’s Shortlist — “Two Kevins and Two Others”

Adding to the intrigue, Trump has narrowed his list of potential Powell successors to what he called “two Kevins and two others.” Market speculation points to Kevin Hassett, a former White House economic adviser known for his market-friendly outlook, and Kevin Warsh, a former Fed Governor with a more hawkish stance on inflation. The “two others” are believed to include current Fed Governor Christopher Waller, known for his methodical, conservative policy style, and Larry Kudlow, Trump’s former chief economic adviser and a vocal advocate for supply-side economics.

Some insiders also point to Scott Bessent, a veteran investor and close Trump ally with deep Wall Street ties, as a potential wild card for a senior economic position, if not the chairmanship itself.

Public Criticism — A Pressure Campaign in Plain Sight

While the president lacks the authority to fire the Fed Chair directly — a safeguard designed to protect central bank independence — Trump has been unrelenting in his public criticism of Powell. He has accused the chair of being “too political” and “too slow” to cut interest rates, framing monetary policy as an obstacle to economic expansion.

The tension came to a head at the July 30 Federal Open Market Committee (FOMC) meeting, when the Fed voted 9–2 to keep interest rates at 4.50%. It was the most divided vote in over three decades. Powell defended the decision, reiterating that rate cuts will only come when there is clear, sustained evidence that inflation is under control.

“Monetary policy decisions are not political decisions,” Powell stated at the post-meeting press conference. “They are based on the data, and the data alone.”

Markets React — And Start Looking Beyond Powell

For investors, the looming leadership transition is more than a political subplot — it has real financial consequences. A Trump-aligned Fed could mean earlier rate cuts, potentially weakening the U.S. dollar while boosting risk assets like stocks and cryptocurrencies. Already, currency traders and bond markets are beginning to price in a shift in tone, treating Powell’s influence as if it were already diminished.

“This is the earliest I’ve ever seen a Fed chair’s authority start to wane ahead of term,” said Michael Torres, managing director at Apex Capital. “Markets are forward-looking by nature, and if they believe the next chair will be more dovish, they’ll adjust positions today, not in 2026.”

Historical Context — The Political Shadow Over the Fed

Political pressure on the Fed is not new. Presidents from Lyndon B. Johnson to Richard Nixon have leaned on central bankers to pursue more accommodative policy ahead of elections. The difference now, experts say, is the speed and transparency with which Trump is acting to shape the institution’s future. Rather than quietly lobbying behind closed doors, Trump is naming names, floating shortlists, and openly questioning Powell’s leadership in public forums.

Source: X

This approach carries both risks and rewards. For markets seeking clarity, an early read on the next Fed chair’s policy outlook can reduce uncertainty. But it also undermines the principle of Fed independence, which is designed to insulate monetary policy from short-term political considerations.

What It Means for Monetary Policy

If Powell’s influence continues to erode, the Fed could enter a transitional phase where markets pay more attention to the presumed successor’s views than to official FOMC statements. This would complicate policy signaling, as Powell and the incoming leadership might have different priorities on inflation, employment, and financial stability.

The result could be heightened market volatility, especially in interest rate-sensitive sectors like housing and technology. It could also fuel speculative rallies in alternative assets — including cryptocurrencies — that benefit from lower borrowing costs and a weaker dollar.

Crypto Angle — A Potential Regulatory Pivot

Miran’s arrival on the Fed Board has energized the crypto community, which sees in him an ally at the highest levels of U.S. monetary policymaking. If Trump’s eventual pick for Fed chair shares Miran’s openness to digital assets, it could mark a major shift in the regulatory posture toward crypto. Such a pivot would contrast sharply with the more cautious, sometimes skeptical approach the Fed has taken under Powell.

“Markets are starting to think about a post-Powell Fed that not only cuts rates earlier but also integrates blockchain and digital currency considerations into its policy framework,” said Angela Kim, a fintech policy analyst. “That could be a game-changer.”

The Road Ahead — Countdown to 2026

With less than a year before the 2026 handover, Powell faces the challenge of maintaining his authority in the face of mounting political and market distractions. The next major inflection point could come if Trump formally announces his choice for Fed chair in the coming months. At that moment, the “Phantom Fed Chair” effect could move from theory to reality.

Writer @Erlin

Erlin is an experienced crypto writer who loves to explore the intersection of blockchain technology and financial markets. She regularly provides insights into the latest trends and innovations in the digital currency space.

 

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