Trump's relentless pressure on Powell could disrupt policy signals; the Fed may face a "double pope" situation.

The recent aggressive actions of the Trump administration against the Federal Reserve have heightened expectations in the market that Jerome Powell will continue to serve on the board after his term as chairman ends in May. This could create a competitive power center within the world's most influential central bank, even though Powell himself may not be willing to do so. The unusual situation has escalated after the US Department of Justice issued a grand jury subpoena to the Federal Reserve, widely seen as an escalation of President Trump's interference in monetary policy. It is still unclear how the legal proceedings will unfold, and it is uncertain how Powell will ultimately decide his own future. People familiar with Powell say that if he chooses to remain on the board, it will be solely to protect the institution of the Federal Reserve, with no intention of playing the role of a "shadow chairman." However, if legal developments do force Powell to stay, it could overturn Trump's publicly stated plan to control the Federal Reserve Board by appointing officials who support significant interest rate cuts. This could also create a strong counterbalance within the Federal Reserve, regardless of whom Trump ultimately nominates as the next chairman.