The White House's dissatisfaction with the Federal Reserve is increasing day by day. What will Powell, who is at the center of the storm, say tonight?

As a series of tariff policy fluctuations and interest rate cut expectations have been repeatedly fluctuating, all eyes in the market this week will be on Powell.

At 01:30 a.m. Beijing time on Thursday, Federal Reserve Chairman Powell will deliver a speech on the prospects of the U.S. economy at the Chicago Economic Club. It is expected that the market will closely monitor his speech for clues regarding potential interest rate cuts as well as progress in regulatory reform encouraging banks to increase their holdings of U.S. Treasuries.

So far, the Fed has adhered to an "observant" stance, and Powell's remarks on interest rate cuts in his latest speech were conservative. According to media reports citing insider sources, the Fed is resisting pressure from the White House and Washington and has not accelerated efforts to encourage banks to increase their holdings of U.S. Treasuries.

With increasing uncertainty in the trade landscape and financial markets, Powell's fate also faces growing uncertainty. Treasury Secretary Bassett stated on Monday that "potential candidates for the next Fed chairman are being considered, and interviews with potential candidates are planned to begin in the fall."

Famous financial analyst Jim Bianco posted on social media that Powell may face two fates: either being directly dismissed by Trump or being de facto sidelined.

Powell Maintains a Conservative Stance on Interest Rate Cuts

In his recent speech, Powell continued to maintain a relatively traditional and conservative position. In his speech at the SABEW Annual Meeting on April 4th, he reiterated the Fed's commitment to its dual mission of maximum employment and price stability, but higher tariffs could push up inflation in the coming quarters.

Last week, President Trump announced a 90-day suspension of most reciprocal tariffs except those on China, catching the market off guard. The market hoped that this ceasefire would alleviate cost pressures, causing stock prices to rise, while some forecasters lowered the probability of an economic recession from 65% to 45%.

Before the tariff truce, the market had expected the Fed to cut rates up to four times this year. This expectation has weakened somewhat, but traders still expect larger easing measures from the Fed than before the truce.

The Fed Refuses to Accelerate Reform to Save the Market

The sharp fluctuations in U.S. Treasury yields recently forced Trump to adopt the tariff truce, even after he changed his mind, investors remained uneasy. Rising Treasury yields indicate pressure on the U.S. government, and confidence in the government's ability to repay debt is weakening. The market has turned its attention to the Fed.

According to Semafor reports, insiders said that the Fed is not accelerating efforts to encourage banks to increase their holdings of government bonds. This stance contrasts sharply with Wall Street and the White House's expectations, which have been lobbying regulators to quickly modify capital requirements to increase banks' willingness to buy U.S. Treasuries.

In his annual letter released last week, Dimon wrote:

These rules actually prevent banks from acting as intermediaries in financial markets, which is particularly painful at the wrong time—when markets become volatile.

Insiders said that the rules penalizing banks holding large amounts of U.S. Treasuries are currently undergoing a grueling internal process that could take several months. However, adjusting these policies could bring billions of dollars of purchasing power to the market. Boston Fed President Collins said last week that the Fed is "absolutely" prepared to intervene if necessary. Some investors believe that this statement indicates that the Fed is ready to step in.

The Fed has been working on a proposal since February but does not plan to rush out the final rule due to concerns about being perceived as panicking—or worse, bailing out the government or hedge funds selling stocks en masse. Insiders said that the current plan is to propose these changes through normal regulatory procedures later in the spring or summer.

Is Powell's Fate in Doubt?

With the changing political landscape in the United States in 2025, Powell's future faces increasing uncertainty. During his campaign, Trump criticized Powell and the Fed's policies multiple times and even threatened to remove him from office.

On Monday, local time, U.S. Treasury Secretary Bassett told reporters in an interview that he and President Trump "are considering" the next Fed chairman and plan to start interviewing potential candidates in the fall.

Chairman Powell's term ends in May 2026, and Bassett's remarks have sparked speculation about changes in the Fed leadership.

Famous financial analyst Jim Bianco posted on social media that Powell may face two fates: either being directly dismissed by Trump or being de facto sidelined:

Trump will not reappoint him (this is beyond doubt). Will Trump fire him? That's very tricky (and legally uncertain). Bassett proposed an alternative solution last year: setting up a "shadow Fed chairman," meaning appointing Powell's successor several months in advance.

Then, the nominee might regularly appear on financial TV shows, acting like an "armchair quarterback" (armchair QB), criticizing every word and decision Powell makes to undermine his authority.

Should we listen to Powell's opinion, who is leaving in May next year, or to the opinion of the upcoming Fed chairman who will take office in May next year? It sounds like the shadow Fed chairman will take office this fall.

The financial market is closely watching the development of this potential power struggle. If Powell is dismissed or his policy autonomy is severely restricted, it may trigger market concerns about the independence of the Fed and lead to increased volatility in bond and stock markets.

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