Silent confrontation! The game between Powell and Trump, will Bostic concurrently serve as the Federal Reserve Chairman?

The competition surrounding the next Federal Reserve Chair is intensifying, with Powell's silence on his future and the emergence of the possibility of Bostic serving concurrently injecting new variables into the outlook for the independence of U.S. monetary policy.

With Powell's current term as Chair set to expire in May next year, he could either leave or remain on the Board of Governors until 2028. This ambiguous stance has been interpreted by some of Trump's advisors as a "resistance" to the president's pressure, and this uncertainty has forced Trump's team to prepare for multiple scenarios.

Trump stated on Tuesday that there are already "two to three top candidates" to succeed Powell, but he refused to disclose specific names. According to Bloomberg, citing informed sources, Trump's advisors have even discussed the possibility of having Treasury Secretary Bostic serve as Fed Chair concurrently in recent weeks. This would be an unprecedented move since the separation of the two roles in 1935.

Powell's Silent Resistance

Powell's silence is considered his most powerful bargaining chip at the moment.

According to regulations, even if his term as Chair ends, his term as a Fed Governor could theoretically continue until January 2028.

When Powell was asked about his term during a panel discussion with global central bank governors on Tuesday, he briefly responded, "I have no comment on this matter."

Media reports citing informed sources indicate that Powell's cautious attitude has frustrated some of Trump's advisors, who believe this is Powell's way of resisting presidential interference in monetary policy.

Neil Dutta, the head of economic research at Renaissance Macro Research, stated that Powell's lack of a clear stance is precisely the "chip" he possesses at this moment. Dutta believes, "If Trump chooses a candidate who is submissive to the president's demands, that is precisely Powell's motivation to possibly remain on the Board."

If Powell chooses to stay on the Board, Trump will only have one scheduled opportunity to appoint a Board member during his term, which would severely limit his ability to reshape the Fed.

Powell would continue to influence interest rate decisions within the Federal Open Market Committee (FOMC), which consists of 19 members, and could potentially unite those who have worked with him for many years. This would pose a significant challenge for any new Chair, especially if the successor comes from outside the Board.

Bostic Serving as Fed Chair?

According to media reports, in light of Powell's uncertain future, discussions have even taken place within Trump's team about the possibility of Treasury Secretary Bostic serving concurrently. Since the legislation establishing the independence of the Fed in 1935, the roles of Treasury Secretary and Fed Chair have never been combined. This design aims to ensure the independence of the central bank.

However, this radical idea was immediately denied by officials. A White House official stated that any reports about the president considering having Secretary Bostic serve as both Treasury Secretary and Fed Chair are "absolutely fake news."

Bostic himself did not confirm or deny this during an interview with Bloomberg Television this week, stating, "I will do what the president wants me to do, but I believe I have the best job in Washington."

Test of Central Bank Independence Amid Political Tensions

The political environment surrounding the Federal Reserve is becoming increasingly tense. Trump's housing finance chief, Bill Pulte, accused Powell on Wednesday of misleading lawmakers regarding the renovation of the Federal Reserve building, claiming this is sufficient to "remove him for cause." Subsequently, Trump himself posted on social media, stating that Powell "should resign immediately."

Although Trump has repeatedly talked about firing Powell, the U.S. Supreme Court's ruling in May raised the threshold for dismissing the Federal Reserve chairman without legal "just cause."

In this highly politicized atmosphere, the decision regarding the chairmanship has become more sensitive than ever. Trump has made it clear that the next chairman must be "someone who wants to cut interest rates."

In addition to Bessent, current popular candidates include sitting governor Christopher Waller, who was nominated to the Federal Reserve during Trump's first term. White House National Economic Council Director Kevin Hassett and former Federal Reserve official Kevin Warsh are also strong contenders among external candidates. The name of former World Bank President David Malpass has also been mentioned.

Regardless of who the final candidate is, their nomination will require confirmation from the Senate. Given the slim Republican majority in the Senate, any nomination cannot afford to lose more than three votes of support.

Dutta stated, "Trump is creating a problem for the next chairman by making the desire for rate cuts too obvious, which makes that person's position very difficult. You look like a political puppet."