The clock is ticking for Jerome Powell. The man who has led the Federal Reserve through a pandemic, a historic inflation surge, and an aggressive rate-hiking cycle will step down as chair on May 15, 2026. What happens in the intervening months may define how history remembers his tenure.

At his December press conference, Powell deflected questions about his legacy with characteristic deflection. "I'm focused on my remaining time as chair," he said. "I haven't got anything new on that to tell you." But his priorities for that remaining time are unmistakable: bringing inflation down to the Fed's 2% target and preserving a labor market that has proven remarkably resilient.

The Legacy in the Balance

Powell's chairmanship has been marked by extraordinary circumstances. He navigated the economic chaos of COVID-19, orchestrating emergency lending facilities and unprecedented monetary expansion. He then presided over the most aggressive rate-hiking cycle in four decades as inflation surged to 9.1%—the highest in 40 years.

By most measures, the result has been a success. Inflation has fallen dramatically from its 2022 peak while unemployment has remained below 5%. The dreaded recession that many economists predicted never materialized. The "soft landing" that seemed improbable two years ago appears to be within reach.

But the mission isn't complete. Core PCE inflation—the Fed's preferred measure—remains above 3%, still meaningfully above the 2% target. And with his term ending in months, Powell faces the uncomfortable reality that he may hand off an unfinished job to his successor.

"I want to turn this job over with the economy in really good shape," Powell said in a recent appearance. The implicit acknowledgment: the economy isn't quite there yet.

The Shadow Chair Looms

Complicating Powell's final months is the near-certainty that President Trump will name his successor imminently—possibly before this article is published. Reports suggest the announcement could come in early January, creating the unusual spectacle of a "shadow Fed chair" for Powell's remaining months.

The leading candidate, according to prediction markets, is National Economic Council Director Kevin Hassett, who has publicly advocated for more aggressive rate cuts than Powell has been willing to deliver. If named, Hassett would effectively be waiting in the wings, his known preferences casting a shadow over every Fed decision Powell makes.

The dynamic is unprecedented in modern Fed history. While presidential transitions always create some uncertainty about Fed leadership, having an announced successor serve as an implicit check on the current chair's authority is something new.

The Independence Question

Perhaps the most consequential aspect of Powell's final months concerns Fed independence itself. Throughout his tenure, Powell has consistently defended the central bank's autonomy from political pressure, even when that stance put him at odds with President Trump.

That the question of Powell's future is even unclear speaks volumes about the current political environment. In past eras, a Fed chair with two years remaining on his term as a governor (Powell's governor term extends beyond his chair term) would likely stay on the Board after stepping down as chair. But the Trump administration has made clear it wants its own people at the Fed, and Powell has carefully avoided committing to anything.

Most Fed watchers believe Powell will leave the central bank entirely when his chair term ends. The alternative—serving as a regular governor under a Trump-appointed chair—would be awkward at best and potentially destabilizing for the institution.

What the Markets Are Watching

For investors, Powell's final months create several key dynamics to monitor:

  • Rate path uncertainty: Markets are pricing in two rate cuts for 2026, but the Fed's own projections suggest just one. Powell's remaining meetings will clarify whether the Fed is truly on hold or preparing for additional easing.
  • Transition risk: The announcement of a successor with different policy views could trigger market volatility, particularly in interest rate-sensitive sectors.
  • Independence signals: Any perception that Powell is adjusting policy based on political pressure—or that his successor will do so—could unsettle markets that depend on the Fed's credibility.

The Historical Parallel

Powell's situation bears some resemblance to Paul Volcker's final years at the Fed. Like Powell, Volcker faced questions about his future and political pressures on policy. Unlike Powell, Volcker ultimately stayed on the Board after stepping down as chair—a decision that created complications for his successor, Alan Greenspan.

Powell appears to have learned from that history. By keeping his post-chair plans deliberately vague, he preserves optionality while avoiding the appearance of clinging to power.

The Bottom Line

Jerome Powell's legacy will ultimately be determined by whether the "soft landing" sticks. If inflation returns to target without triggering a recession, he'll be remembered as one of the Fed's most successful chairs—a pragmatic navigator who steered the economy through unprecedented turbulence. If inflation proves stickier than expected, or if a recession materializes after he leaves, the narrative could shift.

For now, Powell is focused on the work remaining. "We want to be able to look back and say we did everything we could," he said recently. With four months left, he's running out of time to prove it.