President Trump says investigation into Federal Reserve Chairman Jerome Powell will continue
President Donald Trump said in an interview on FOX Business that he has no intention of calling off the investigation into Federal Reserve Chairman Jerome Powell.
The Fed is likely to remain in wait-and-see mode and keep interest rates unchanged at the end of its two-day meeting on April 29, amid lingering concerns about the risk of an Iran war accelerating inflation and the job market.
Rather than interest rate decisions, the focus may be on Jerome Powell’s press conference, which could be his last as chairman. Fed watchers will be looking for clues in his words about whether officials see inflation or a weak job market as a greater threat.
Concerns about the slowing labor market and low employment environment prompted the Federal Open Market Committee to cut interest rates three times late last year. Those concerns remain, but are alleviated somewhat by Labor Department estimates that U.S. employers added 178,000 jobs in March. Meanwhile, the province’s consumer price index, a measure of annual inflation, jumped from 2.4% in February to 3.3% in March.
Prices are likely to continue rising in the near future due to the Trump administration’s new tariffs, rising oil prices and supply chain disruptions due to the war. The key question is whether these inflationary shocks are temporary or persistent, and the distinction depends on how long the war lasts.
Forecasters overwhelmingly expect the committee to keep interest rates unchanged in the range of 3.5% to 3.75%.
There is no “obvious” route for fees.
Chairman Powell downplayed concerns about stagflation in a press conference after the last rate decision, saying he was reserving his term in case a more serious situation arises. Still, Chicago Fed President Austan Goolsby said it’s a scenario that will keep him up at night.
“High oil prices could cause stagflation before tariff inflation is resolved, and the result is that American consumers, who are the mainstay of growth, just give up, say they don’t have confidence, start hoarding money, and we end up in a stagflation-like recession. That would be the worst outcome,” Goldsby said at the Detroit Economic Club on April 7.
At the same time, Goolsby said Americans’ incomes and the unemployment rate (4.3%) remain “strong.” He agreed with Powell’s view that there is no “obvious” path for interest rates.
As of March 18, members’ median forecast for the federal funds rate at the end of 2026 was 3.4%, suggesting a quarter-point cut, but a rate cut could occur in the second half of this year.
“Continued uncertainty related to the Strait of Hormuz strengthens the case for the Fed to remain on the sidelines, certainly for the next meeting, and perhaps for months after,” Sue Hill, head of the government liquidity group at global investment management firm Federated Hermes, said in a report to USA TODAY.
Treasury Secretary Scott Bessent and Cleveland Fed President Beth Hammack, who holds a vote on the committee, have both indicated the Fed will pause in April.
Pending transition from Powell to Warsh
Under normal circumstances, Powell’s term would end on May 15, and the FOMC would not meet again until mid-June, so the press conference following the April decision would be Powell’s last. But Powell has said he will remain in the position on an interim basis if a replacement is not confirmed by the end of his term.
President Donald Trump nominated Treasury Department official and former Federal Reserve chief Kevin Warsh for the post, but his confirmation has been held up by Sen. Thom Tillis (R-North Carolina), who wanted to first end the Justice Department investigation into Powell. On April 24, D.C. U.S. Attorney Jeanine Pirro announced that the department had closed its investigation, but said, “We will not hesitate to reopen a criminal investigation if the facts warrant.”
The decision likely clears the way for Warsh’s confirmation, as Tillis acknowledged in an April 26 social media post that he looks forward to supporting Warsh as a candidate.
“I take the Department of Justice at its word. The investigation is closed and any appeal of Judge Boasberg’s decision will be based on legal principles and not for the purpose of reissuing subpoenas,” Tillis said. “The investigation will not be reopened unless a criminal complaint is filed by the inspector general.”
He continued, “With these assurances, I look forward to supporting Kevin Warsh’s confirmation. He is an outstanding candidate, and it is time for the Federal Reserve to move past this distraction and return to its mission.”
President Trump threatened to fire Powell if he did not resign in mid-May, but Powell told reporters on March 18 that it was “required by law” for Warsh to remain in the chair if he was not confirmed in time. He added that he plans to continue serving on the Fed’s board of directors until the Justice Department’s investigation is “truly concluded.” His term ends in January 2028.
“This scenario would raise significant legal issues, especially as the legal case surrounding the removal of Fed Director Lisa Cook is still pending,” David Royal, chief financial and investment officer at Thrivent, told USA TODAY. “It would further heighten tensions about the Fed’s independence, which both markets and Congress have expressed serious concerns about in the past. Any Fed transition could increase market volatility, but this scenario would almost certainly amplify volatility as markets seek clarity on next steps.”
If confirmed, Warsh could try to introduce a series of reforms to the Fed. At his confirmation hearing on April 21, he suggested that the central bank needs new tools, a new inflation framework, and a new communication style that is less focused on forward guidance.
Isaac Wheeler, managing director of balance sheet strategy at Derivatives Path, said that if Mr. Warsh is not confirmed in time, much attention will be focused on the “showdown” between Mr. Trump and Mr. Powell, but to Main Street consumers, Mr. Warsh and Mr. Powell are not that different anyway.
“For someone like me who’s in the markets every day, yes, he’s definitely different,” Wheeler said, but added, “At the end of the day, this pick is probably one of the most traditional things the administration has done. … No one should expect the Fed to change dramatically overnight or that interest rates will change dramatically just because he’s appointed.”
What do the FOMC’s interest rate decisions mean for consumers?
Generally, the Fed lowers its base interest rate to stimulate the economy and raises it to control inflation. Interest rates will be left unchanged if we judge that monetary policy is in good condition or if there is a threat to both sides of the dual mandate.
Lower interest rates make it cheaper to borrow, which can indirectly impact financing rates on auto loans, personal loans, and credit cards. It also encourages business investment and growth, which can lead to increased employment. Higher interest rates could reduce inflation by reducing spending, which could theoretically help consumers by stabilizing prices.
But not everything about inflation and the labor market is under the Fed’s control. As mentioned earlier, new tariffs and oil price shocks are likely to keep prices high for the foreseeable future. Immigration crackdowns that limit the supply of workers, companies’ adoption of artificial intelligence, and general uncertainty have caused many employers to halt large-scale hiring.
William Stern, founder and CEO of Cardiff, a small business lender, said small business owners, who are often locked out of capital, shouldn’t view the Fed as a “superhero” who can save them.
“The people who actually build this country are fighting for their lives against a unified enemy: perpetual inflation,” Stern said. “As consumers and small business owners, we have to write our own stories and make sure there is a happy ending. That means being able to take a bullish stance and make decisions independently, whether we receive a rate cut or not.”
The FOMC is scheduled to announce its interest rate decision on April 29th at 2:00 pm ET, followed by Chairman Powell’s press conference scheduled for 2:30 pm ET.
Contact Rachel Barber at rbarber@usatoday.com, follow her at X @rachelbarber_ and subscribe to her newsletter Making More of Your Money here.
