BlockBeats news: On January 15, after the U.S. Department of Justice launched an investigation into Federal Reserve Chair Jerome Powell, the situation began to shift in a direction opposite to what Trump had hoped. The probability of Powell remaining in his position until 2028 started to rise, while the chances of the more hawkish candidate, Christopher Wall, winning the next Federal Reserve chairmanship began to overtake those of Kevin Hassett. Trump may find himself in a prolonged struggle with the Federal Reserve throughout the year.
According to Polymarket data, shortly after Powell released a video response to the investigation on January 11, the probabilities of him leaving the Federal Reserve Board at the end of May and by the end of the year both sharply declined. Currently, bettors believe the probability of Powell leaving the Fed before May 30 has dropped from 74% at the beginning of the month to 45%, and the probability of him leaving by the end of the year has also fallen from 85% to 62%.
The prediction market also adjusted its probability expectations for Trump ally Kevin Hassett being nominated as the next Federal Reserve Chair. Before and after news of the Department of Justice investigation spread, Kevin Warsh, a more hawkish candidate on the list of potential Fed Chair nominees, began to overtake Hassett in support on Polymarket.
Policy analyst Dan Clifton said that since last summer, there had been an informal agreement between Trump and Powell: if Powell agreed to leave the Federal Reserve when his chairmanship term ended in May of this year, Trump would not further criticize the Fed's multi-billion-dollar headquarters renovation project. Trump had previously harshly criticized the renovation plan, but his criticisms of the Fed had somewhat diminished in the second half of last year. That bottom line was broken last Sunday, instead making it more likely that Powell will remain at the Fed in a regular board member role. Continuing to personally attack Powell could ultimately prove to be a wasted effort.