Fed Chairman Jerome Powell actually wore two hats: He is the chairman of the Fed Commission and Chairman of the Federal Open Market Committee.
Historically, the chairman of the board is also the chairman of the FOMC, but that is not necessarily the case. In fact, the Fed even hints Explainer on how central banks work.
“Based on the law, the FOMC has decided on its own internal organization, and traditionally, the FOMC has elected
Chairman of the Board serves as Chairman and new Federal Reserve Bank Chairman
York serves as vice chairman,” it said.
The Federal Reserve governor, including the chairman, is nominated by the president and confirmed by the Senate. But the members of the FOMC decide who is Rate Setting Committeeconsisting of seven governors, the chairman of the New York Federal Reserve and four other regional Federal Reserve chairmen.
Fed policymakers cautiously defend the Fed’s reputation to be independent of political pressure. This is where tradition and law can be divided, leading to one person as chairman of the FOMC and another as chairman of the board.
FOMC Chairman and Board Chairman
Here is how to assume splitting:
FOMC chose chairs at its first meeting this year. In 2026, the plan is scheduled to be from January 27 to 28. Only current members of FOMC are eligible to serve as chairpersons.
Powell’s As chairman It expires on May 15, 2026, but his term as governor was extended to January 2028. In theory, he could stay on the FOMC and qualify as his chair until then – if he doesn’t resign, he chooses to stick with it for a longer time.
The Federal Reserve Committee Vacancy Will Open Governor Adriana Kugler’s tenure Expired on January 31, 2026. Trump can fill that position and replace Powell as chairman of the board. However, when the FOMC chair is selected, the person will not be able to take place at the first meeting of the FOMC.
After the new board chairman takes over, the FOMC can vote again later this year. But no one can force a revival, Robert Eisenbeis previously served as research director at Atlanta Fed.
The habit of the Fed chairman of the New York City is to nominate the chairman of the board as the chairman of the FOMC. But again, it’s not necessary wealth.
Unless the FOMC decides to vote again, their next choice of chair will be held at the first meeting in the second year of January 2027. As Powell’s term as governor expires in January 2028, similar situations may occur in 2027.
“So we ended up with a year without someone from the FOMC chair and there was a certain monetary responsibility among the participants,” Eisenbeth explained.
In this case, more complications are added, and the management committee and FOMC pull different levers. FOMC sets federal funding interest rates, and what Trump has always said should be lowered. Meanwhile, the board sets the interest rates paid to banks as their reserves retained by the Federal Reserve and oversees the “discount window”, which can provide liquidity to banks.
As far as he knows, Eisenbeth said there is no case in the history of the Fed, where different people presided over the FOMC and the board of directors. It is not clear whether one chair will surpass another.
“So, because of the split responsibility, you can have this disagreement and conflict between the FOMC and the board,” he said. “And no one knows who is in charge.”
The Fed did not comment.
Shadow chair and AP chair
Eisenbeis warned that such disagreements could undermine the market as investors will have difficulty figuring out which chair complies with which chair the most.
But talks about the “shadow” Fed chairman have raised the prospect of a vocal conflict on monetary policy, and he will be nominated before Powell’s term expires next May.
The idea is that the shadow chair can lower the financial situation in the jawbone market, such as lowering bond yields, taking office and Suppressing Powell’s messaging In his last few months.
Trump said last month that his draft pick to replace Powell was about to “quickly” and even vowed to hit things that would force the Fed to do for months.
“If I think someone is going to keep interest rates anywhere or anywhere else, I’m not going to put them in,” Trump said. “I’m going to put someone who wants to lower interest rates.”
The concept of shadow chair has been Propose an alert as the secret to market chaos. Princeton professor Alan Blinder served as vice chairman of the Federal Reserve in the 1990s Tell CNN Recently, it also has a large showdown in FOMC.
“If he or she contradicts what Powell said, that would aggravate the FOMC, and almost all members will remain there when the new chairman takes over,” he explained. CNN. “This opens the door to an uprising that opens open or silently, which is a rare thing in the history of the Federal Reserve.”
“The system will compete with it”
Ed Yardeni, president of market veteran, said in a report on Monday that no matter who is Trump’s loyal, no matter who is who, it still has to work with other consensus-driven FOMCs, and there are few even some dissenters in policy decision-making.
If the loyalists take over, and the monetary policy outliers are too large compared to the rest of the FOMC, the chair may even be surpassed.
“This will seriously undermine the power of the Fed’s chairman and raise concerns about internal conflicts with the Fed,” Yardeni warned.
Eisenbeis noted that the FOMC chairman could not order around other members and recalled former chairman G. William Miller in the late 1970s, who had faced ups and downs but failed to try to ban smoking in the Fed.
Like the blind man of the former vice-chairman, he saw how Fed officials forcibly protecting their independence and consensus traditions (persuading rather than command) are how members make decisions.
Eisenbeth predicts: “If someone says ‘I’m in charge, you’ll do everything I say,’ the system will be the opposite.”
