Powell's term expires May 15. The DOJ dropped its criminal probe of him this morning. Jeanine Pirro announced it on X, said the inspector general would handle it from here, and added — with admirable audacity — that she reserved the right to restart a criminal investigation if the facts warranted. The facts, for context, are a construction project that went from $1.9 billion to $2.5 billion due to asbestos, a sinkhole, and rising labor costs. A federal judge had already called the investigation an unjustified act of intimidation. The probe nonetheless ran for months.
So ends one of the stranger episodes in the history of central banking.
What it clears the way for is more interesting than what it closes off. Kevin Warsh — former Fed governor, Morgan Stanley deal-maker, now Trump's pick for the most consequential financial post on the planet — can proceed toward confirmation. Sen. Thom Tillis, who had held the nomination hostage pending the probe's resolution, can now vote his conscience. The White House is calling this a swift confirmation. Given that Powell's term lapses in three weeks, "swift" is doing a lot of load-bearing work in that sentence.
Here is what markets think they're getting with Warsh: a hawkish-ish institutionalist who will talk tough on independence while quietly accommodating the rate cuts Trump has been demanding since 2025. The narrative sells itself. Warsh said at his Senate hearing that monetary policy independence is "essential." He also said he doesn't believe that independence is "particularly threatened" when the president loudly and repeatedly demands lower rates. These two statements can theoretically coexist. They have never been stress-tested in the same sentence before.
The bond market should be paying more attention than it is.
Ten-year Treasuries are sitting around 4.25%, up over 20 basis points since the Iran war began in late February. That's not the bond market pricing a rate-cutting cycle. It's pricing supply risk, oil-driven inflation, and the ambient uncertainty of having an outright war severing 20% of global seaborne oil supply. Into that environment, the United States is preparing to install a Fed chair whose confirmation was contingent on the resolution of a politically-motivated criminal probe, whose nomination came packaged with explicit presidential expectations about rate direction, and who told the Senate Banking Committee that he's open to holding fewer than eight FOMC meetings per year.
That last point gets insufficient attention. Powell's decision to hold press conferences after every meeting represented a genuine commitment to transparency — markets could update their rate expectations eight times a year on clean, publicly communicated data. Warsh floated the idea of pulling back. He said "truth-seeking is more important than repetition," which is a lovely aphorism that means approximately nothing in practical monetary policy terms. What it actually signals is a preference for less-legible Fed communication — fewer anchored expectations, more discretion, more room for the chair to move without market discipline. That's useful flexibility if you're good. It's a liability if the market decides it can't read you.
And Warsh is genuinely hard to read. He is hawkish on inflation by instinct — he dissented from QE2 in 2010 and has been skeptical of balance sheet expansion for years. He's a genuine institutionalist by temperament. But he was also selected by a president who has called Powell "Too Late" for months and who, as recently as Tuesday, mused publicly about whether the Fed chair was personally profiting from a construction project. Warsh can insist Trump never asked him to commit to any rate decision. That's probably true. It's also beside the point. The question isn't what Trump asked. The question is what Warsh infers, and what the market infers about what Warsh infers.
The Bank of England's Sarah Breeden said Friday that equity markets are overvalued and that a correction is coming, noting that private credit — now a $2.5 trillion market that "hasn't been tested at this scale" — represents a systemic risk that doesn't show up in the usual stress indicators. She said this in an interview, calmly, on the BBC. The S&P 500 ended Friday at a record high. The market's response to sober central bank risk warnings has become a kind of Pavlovian shrug. These people are always worried about something.
But the timing of Breeden's warning overlaps uncomfortably with the Warsh transition, because the scenario she's describing — a private credit crunch rather than a bank-driven one, less legible, less centralized, harder to respond to quickly — is precisely the kind of crisis that a central bank in institutional flux handles worst. The Fed during a leadership transition, with new communication norms, a new chairman still finding his footing with twelve FOMC members whose loyalty was to the previous regime, possibly fewer press conferences, definitely a president watching the rate decisions in real time and narrating them on Truth Social — that's not a Fed that should be tested by a private credit event. That's a Fed that needs clear skies for at least six months just to establish its credibility.
The skies are not clear. Oil is at $106. Consumer sentiment is at a record low. The Strait of Hormuz is a standoff. Microsoft, Amazon, Alphabet, and Meta report April 29. If any of them signal that $106 Brent is starting to pinch AI infrastructure capex timelines, the earnings story that's been holding the market together gets complicated fast.
Powell, for all his faults and for all the ritual abuse Trump heaped on him, navigated a pandemic, a historic tightening cycle, and the opening months of a Middle East war with a kind of methodical, unexciting competence that markets eventually came to treat as a given. That's the thing about good central banking: it's most visible in what doesn't happen.
What doesn't happen is not guaranteed. It's earned, meeting by meeting, over years of boring institutional consistency.
Kevin Warsh may be excellent. He may surprise people. He may turn out to be precisely the figure the moment needs. But the market is pricing his arrival like it's a routine handoff, not an institutional inflection point happening in the middle of an oil shock, a ground war, and a consumer sentiment collapse.
One of those assumptions will probably need to be revised.
Published April 25, 2026
