The chairman of the Federal Reserve, Jerome Powell And Chairman of the Federal Open Market Committee.
Historically, the CEO was also FOMC chairman, but it doesn’t have to be that way. In fact, the Fed even plays in its Own explaner about how the central bank works.
“According to the law, the FOMC determines its own internal organization and according to tradition the FOMC selects the
Chairman of the Governor Council as Chairman and President of the Federal Reserve Bank of New
York as deputy chairman, ”it says.
Fed governors, including the chairman, are nominated by the President and confirmed by the Senate. But members of the FOMC decide who is the chairman of the Installment committeewhich consists of the seven governors, the New York president and four other regional Fed president, the rotating serve.
Fed political decision -makers carefully guard the reputation of the Fed to be regardless of political pressure. And here tradition and the law could deviate, which means that a person acts as a FOMC chairman and a different chairman of the board.
FOMC chairman against CEO
This is how a hypothetical separation could arise:
The FOMC selects its chair at its first meeting of the year. In 2026 this is planned for January 27th to 28th. Only a current member of the FOMC is entitled to be chair.
Powells Duration as CEO On May 15, 2026, his term as governor extends until January 2028. Theoretically, he was able to stay on the FOMC and work as a chair as a chair – if he does not resign and stays longer instead.
A vacancy in the Fed Board will open up as Governor Adriana Kugler’s term Trump expires on January 31, 2026. Trump could nominate someone who can fill this point and replace Powell as CEO. However, this person would not be available for the first meeting of the FOMC if the FOMC chair is selected.
The FOMC was able to hold a further coordination later in the year after a new CEO was taken over. According to Robert Eisenbeis, who previously acts as a research director at Atlanta Fed, nobody can force a revote.
It is common for the New York President to appoint the CEO as FOMC chairman. But that’s not a prerequisite, he said, he said Assets.
If the FOMC does not decide to hold another vote, it would be the next time in January 2027 at the first meeting of the following year. Since Powell’s term as governor runs in January 2028, a similar situation could take place in 2027.
“So we have a year in which someone who is not a chairman of the FOMC and among the participants gives a division of money responsibility,” said Eisenbeis.
Adding other complications to this scenario is that the board of directors and the FOMC pull different levers. The FOMC determines the Federal Fund Katz what Trump said should drop. In the meantime, the board of directors determines the interest rate that is paid to banks for reserves that they keep at the Fed and monitors the “discount window” that can give banks liquidity.
According to his knowledge, Eisenbeis said that there was no case in the history of the Fed, in which different people lead the chairman of the FOMC and on the board. It is also not clear whether one chair would exceed the other.
“So you can have these disagreements and this conflict between the FOMC and the board of directors because of the split responsibilities,” he said. “And nobody knows who is responsible.”
The FED made no comment.
Shadow chair against Fed chair
Such a separation could be annoying for the markets, since the investors would have difficulty finding out which chair for most follows, warned Eisenbeis.
However, the prospect of contradictory votes on monetary policy has already been raised by the speech by a “shadow” fed chair, which will be nominated long before Powell’s term in the next May.
The idea is that the shadow chair for the financial conditions, such as undermine Powells messages in his last months.
Trump said last month that his choice of replacing Powell came “very soon” and even sworn to type someone who will do what he has put under pressure for months.
“When I think someone holds the prices where they are or whatever, I will not use them,” said Trump. “I will put someone who wants to lower prices.”
The concept of a shadow chair already has Increased alarms as a recipe for market chaos. Princeton Professor Alan Blinder, who acted as deputy chairman of the Fed in the 1990s. told Cnn Recently it could also set up a big showdown in the FOMC.
“If he or she contradicts what Powell says, it will make the FOMC worse, almost all of members will still be there if the new chair takes over” Cnn. “It opens the door to an open or quiet uprising against the chair, which is a rare thing in the history of the Fed.”
“The system will rise”
The market veteran Ed Yardeni, President of Yardeni Research, said on Monday in a note who the next Fed chair, a Trump loyalist or not, still has to work with the rest of the consensus FOMC, which is rare that it has only a few dissent in a political decision.
If a loyalist takes over and is too much outlier in monetary policy compared to the rest of the FOMC, the chair could even be survived.
“That would seriously weaken the power of the Fed chair and concerns about the internal conflict with the Fed,” warned Yardeni.
Eisenbeis pointed out that the FOMC chairman could not order with other members, and remembered a former chairman from the late 1970s, G. William Miller, who tried to ban smoking at the Fed, but confronted and failed against pushback.
Like Blinder, the former deputy chairman, he sees Fed officials who guarded their independence and tradition of consensus by force -where it is more convincing than commanding -as members make decisions.
“When someone comes in, he says” I’m responsible and you will do what I say “, the system will get up,” said Eisenbeis.
