• The White House’s recent criticism of the Federal Reserve’s headquarters renovation project has highlighted the central bank’s sources of funding. Unlike federal departments that receive taxpayer dollars via appropriations from Congress, the Fed is self-funded, largely via interest income from government securities it holds.

The Federal Reserve’s funding has come under scrutiny as the White House attacks the $2.5 billion headquarters renovation for cost overruns.

That controversy was underscored on Thursday, when President Donald Trump and Fed Chairman Jerome Powell disagreed over the cost during a visit to the central bank. Trump’s allies have suggested the project could be grounds for ousting Powell, but the president has said he would not fire him, though Trump continues to demand lower rates.

Unlike the Pentagon and a new weapons system that has blown through its budget, the Fed and its operations are funded differently.

While the Defense Department and other executive branches receive money from Congress, the Fed is self-funded, largely via interest income from government securities it holds.

That means no taxpayer dollars have been appropriated for Fed operations — including building projects like the headquarters renovation.

Most of the Fed’s income comes from assets such as Treasury bonds and mortgage-backed securities that sit on the central bank’s balance sheet and earn interest.

That balance sheet exploded in size during the Great Financial Crisis and COVID-19 pandemic as the Fed bought trillions of dollars of bonds to prop up the economy.

Other sources of income include interest on foreign currency investments held by the Fed; fees for services like check clearing, funds transfers, and clearinghouse operations provided to depository institutions; and interest on loans to depository institutions. 

To be sure, the Fed’s mission isn’t to maximize its earnings from trading securities. Instead, it has a dual mandate of stable prices and maximum employment. Buying and selling assets is only a means for achieving those ends.

Meanwhile, the Fed also has costs, including interest payments on reserve balances, interest payments on securities sold via repurchase agreements, and operational costs like payroll and its buildings. Costs go up when the Fed hikes interest rates like it did in 2022 and 2023 to tamp down inflation.

When income exceeds those costs, the Fed hands over the surplus to the Treasury Department. In fact, in the decade before COVID, the Fed sent about $1 trillion to the Treasury.

When the Fed’s costs exceed its income, the central bank creates an IOU known as a “deferred asset” to pay for operations. As interest rates rose, the Fed’s deferred asset grew from $133 billion in 2023 to nearly $216 billion in 2024. As of Wednesday, it was $236.6 billion.

Once rates come down further and income tops losses again, the Fed will pay back the deferred asset and then resume giving the Treasury any excess earnings.

“In conclusion, tighter monetary policy to rein in inflation has resulted in a reduction of net income for the Fed,” the St. Louis Fed said in a 2023 explainer. “This does not mean that the Treasury has to recapitalize the Fed, but rather that the Fed records a negative liability in the form of a deferred asset. This deferred asset accumulates until the Fed sees positive net income, which should happen once interest rates on the long-duration assets it owns start exceeding the interest paid on bank reserves and reverse repo facilities.”

This story was originally featured on Fortune.com

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• One of the provisions of the trade deal that set a 15% tariff on Japan is a pledge from Tokyo to invest $550 billion in key American sectors. The White House said the money will be deployed “at President Trump’s direction,” potentially giving him a bigger say in U.S. industrial policy. But details remain thin, and analysts are skeptical.

The pledge from Japan to invest $550 billion in key U.S. industries could show other countries how to clinch a trade deal with the U.S., even as analysts question how real that money is.

As part of the agreement that set a 15% tariff rate on Japan, the White House said it includes a “Japanese/USA investment vehicle” that will be deployed “at President Trump’s direction” into strategic sectors.

They include energy infrastructure and production, semiconductors, critical minerals, pharmaceuticals, and shipbuilding, according to a fact sheet from the administration. The U.S. would retain 90% of the profits, though the Japanese government believes profits will be split based on “the degree of contribution and risk taken by each party,” according to the Financial Times.

Still, Treasury Secretary Scott Bessent highlighted the fund as a key reason the U.S. and Japan were able to settle on a levy that was lower than the 25% rate Trump had threatened earlier.

“They got the 15% rate because they were willing to provide this innovative financing mechanism,” he told Bloomberg TV on Wednesday, when asked if other countries could get a similar rate.

Indeed, analysts at Bank of America said that the Japan deal “looks like a reasonable blueprint” for other auto-exporting countries like South Korea.

Both countries have similar trade characteristics with the U.S., such as high current account surpluses, high U.S.-bound exports, and less open domestic markets via non-tariff measures, the bank said in a note on Friday.

But Wall Street has serious doubts that the $550 billion will actually materialize. Takahide Kiuchi, executive economist at Nomura Research Institute and a former Bank of Japan policymaker, said in a note Wednesday that the investment pledge is merely a target and not a binding promise.

“In reality, under the Trump administration, many Japanese companies likely view the business environment in the U.S. as deteriorating due to tariffs and other factors,” he explained. “Furthermore, at current exchange rates, labor costs in the U.S. are extremely high, providing little incentive for Japanese firms to expand investment there. If anything, we may see a stronger trend toward diversifying investments away from the U.S.”

Meanwhile, Council on Foreign Relations senior fellow Brad Setser, a former U.S. Trade Representative advisor and Treasury Department official, similarly expressed skepticism about the money.

“Odds are it is vapor ware, beyond the known deals (Alaska LNG),” he posted on X on Wednesday, likening it to a highly touted product that may never become available, “but it would be strange (and would potentially set up future problems) if the US relied almost entirely on other people’s money to fund its own industrial strategies.”

He later added “there is a lot less here than meets the eye,” and pointed out that the industrial sectors highlighted as areas for investment are already logical ones for Japan, given current supply-chain concerns.

A source familiar with the matter acknowledged to Fortune that a lot of details of the $550 billion have yet to be worked ironed out. That includes the timeframe of the investment as well as an advisory board and guardrails against potential conflicts of interest.

But the source added that the investment would be funded by the Japanese government and is not a just pledge from Tokyo to buy commodities or for Japanese companies to steer investments into the U.S.

It also means Japan is fronting the cash to finance projects that are likely to be in the private sector, the source said, offering a hypothetical example of a chip company looking to build a U.S. plant.

Under this scenario, the investment vehicle could finance construction of the factory and lease it out at favorable terms to the chip company, with 90% of the rent revenue going to the U.S. government.

The $550 billion pledge also comes as Trump’s tariffs face legal challenges, with a court hearing scheduled Thursday on whether the president has authority under the International Emergency Economic Powers Act to impose wide-ranging duties.

That could make it attractive for countries to promise a lot of money sometime in the future to obtain immediate tariff relief, while running out the clock as legal battles play out.

Analysts at Piper Sandler have concluded that Trump’s tariffs are illegal and noted that the $550 billion Japanese investment comes with few concrete specifics.

“Our trading partners and major multinationals know Trump’s tariffs are on shaky legal ground,” they wrote. “Therefore, we find it hard to believe many of them are going to make massive investments in the US they would not have otherwise made in response to tariffs that may not last.”

This story was originally featured on Fortune.com

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• The data infrastructure and operations company showed it also has a sense of humor after its CEO and HR chief resigned amid fallout from a kiss-cam moment that captured them hugging during a Coldplay concert. The company posted a video of actress Gwyneth Paltrow, the ex wife of Coldplay singer Chris Martin, addressing the company’s most common questions.

Astronomer showed it also has a sense of humor after its CEO and HR chief resigned amid fallout from a kiss-cam moment that captured them hugging during a Coldplay concert.

The data infrastructure and operations company posted a video late Friday of actress Gwyneth Paltrow, who said she was hired on a “very temporary basis” to speak on behalf of the more than 300 employees at Astronomer.

“Astronomer has gotten a lot of questions over the last few days, and they wanted me to answer the most common ones,” she said. 

The first question was shown in text on screen as, ‘OMG! What the actual f,’ to which Paltrow enthusiastically replied, “Yes, Astronomer is the best place to run Apache Airflow unifying the experience of running data, ML, and AI pipelines at scale! We’ve been thrilled so many people have a newfound interest in data workflow automation!”

The other common question shown on screen was, “How is your social media team holding,” prompting Paltrow to respond by saying, “Yes, there is still room available at our Beyond Analytics event in September.”

The video came at the end of a tumultuous period for Astronomer. The once-obscure company went viral after Coldplay singer Chris Martin, who was previously married to Paltrow, spotted the company’s Andy Byron and Kristin Cabot hugging during a kiss-cam moment at a concert and said they are “having an affair or they’re just very shy.” 

Byron, who is married, and Cabot, attempted to hide from the cameras. They have since resigned from their respective roles as CEO and HR chief.

On Monday, Astronomer’s interim CEO and cofounder, Pete DeJoy, addressed the public for the first time since taking over for his scandal-laden predecessor.

“The events of the past few days have received a level of media attention that few companies—let alone startups in our small corner of the data and AI world—ever encounter,” he wrote on LinkedIn. “The spotlight has been unusual and surreal for our team and, while I would never have wished for it to happen like this, Astronomer is now a household name.”

Meanwhile, Paltrow also sought to help steer the public away from the scandal in her video for Astronomer on Friday.

“We will now be returning to what we do best: delivering game-changing results for our customers,” she said cheerfully. “Thank you for your interest in Astronomy.”

This story was originally featured on Fortune.com

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• The S&P 500 and Nasdaq set fresh intraday records on Monday, while the Dow Jones Industrial Average reversed slightly lower. Upbeat corporate earnings continued to fuel the stock market rally, even as uncertainty over President Donald Trump’s tariffs persisted and the White House continued to pressure the Federal Reserve.

U.S. stocks powered higher on Monday as strong earnings overshadowed continued uncertainty on tariffs and the White House’s pressure on the Federal Reserve.

The S&P 500 closed up 0.14%, and the Nasdaq rose 0.38%, paring gains after touching new all-time intraday highs. The Dow Jones Industrial Average reversed lower, slipping 19 points, or 0.04%.

The yield on the 10-year Treasury dropped 4.7 basis points to 4.384%. The U.S. dollar fell 0.55% against the euro and sank 0.97% against the yen. That’s after upper-house parliamentary elections in Japan were not as disastrous for Prime Minister Shigeru Ishiba’s coalition as feared, though his future remains in doubt.

Gold jumped 1.52% to $3,409.50 per ounce. U.S. oil prices dipped 0.52% to $66.99 per barrel, and Brent crude lost 0.42% to $68.99.

Verizon helped the market after beating quarterly earnings forecasts and raising its profit outlook for the year. Shares of the telecom giant surged 4%.

That follows upbeat results last week from big banks like JPMorgan, which said U.S. consumers remain resilient despite headwinds from tariffs.

After the first week of this earnings season, 73% of companies have beaten per-share profit estimates, above the first-week average of 68%, according to Bank of America.

Other companies reporting this week include Tesla, Alphabet, Intel, Coca-Cola, Lockheed Martin, General Motors, RTX, Northrop Grumman, IBM, AT&T, Honeywell, and Union Pacific.

Meanwhile, Trump’s trade war and his war on the Fed are still hanging over the market.

On Monday, Treasury Secretary Scott Bessent told CNBC that trade talks are moving along, adding that getting a good deal is more important than the timing of a deal. That could suggest the Aug. 1 deadline, when higher tariff rates are due to kick in, may be more flexible.

In the same interview, he also ramped up pressure on Fed Chairman Jerome Powell, who has resisted Trump’s calls to lower rates. Bessent said “the entire Federal Reserve institution” should be examined.

That’s after the White House accused Powell of mismanagement over the Fed headquarters renovation, while backing off suggestions he should be fired.

This story was originally featured on Fortune.com

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• President Donald Trump’s tariffs are expected to heat up prices later this year, but the housing market is looking weak enough that it may cool overall inflation. That would clear the way for the Federal Reserve to lower interest rates, which Trump has been pressuring Chairman Jerome Powell to do for months.

The Federal Reserve is keeping a close eye on President Donald Trump’s tariffs and how they will affect inflation, but the housing market may clear the way for lower rates—rescuing central bankers from the White House’s relentless pressure for more easing.

The housing market has largely been frozen since the Fed launched an aggressive rate-hiking campaign in 2022, as mortgage rates jumped along with Treasury yields.

Last year saw a few rate cuts, but prospective homebuyers still face high borrowing costs, and the strains are starting to show. Now, there are growing alarms that home prices, sales and homebuilding are all headed for a slump.

Housing accounts for about a third of the goods and services measured in the consumer price index, meaning weakness in shelter costs can slow inflation readings substantially.

That could offset the inflationary effects of Trump’s expansive tariffs. While they have yet to trigger a big spike in prices, there are signs that import-sensitive categories, such as autos and appliances, are already feeling the impact of higher duties.

In a note last week, Comerica Bank chief economist Bill Adams said the cooling housing market is helping bring down core service price inflation, in a trend disconnected from tariffs.

“Toward the end of the year, the housing market may become a bigger deal for inflation than tariffs,” he predicted. “Housing weakened in the second quarter, with sluggish construction and sales and falling price indexes. If house prices and rents continue to run cool they will further slow core inflation.”

Cooler inflation is more likely than labor market data to spur Fed rate cuts. Adams noted that even if hiring becomes sluggish, the unemployment rate will probably hold steady.

That’s because Trump’s immigration crackdown is squeezing the labor supply, so demand for workers would have to tumble for the jobless rate to jump, he explained. And with Trump’s tax cuts going into effect later, businesses are unlikely to slash hiring.

“A more likely outcome for the economy is that the weakening housing market cools core inflation enough that the Fed feels comfortable incrementally reducing rates late this year,” Adams wrote, adding that Comerica expects a quarter-point cut from the Fed at the December meeting.

December won’t be soon enough for Trump, but others on Wall Street don’t see any cuts this year. At the same time, Trump is mindful of the Fed’s impact on housing. In a Truth Social post on Friday, he said Fed officials are “choking out the housing market with their high rate, making it difficult for people, especially the young, to buy a house.”

Chairman Jerome Powell and other policymakers have held off on lowering rates, pointing to the potential for tariffs to stoke inflation further later this year.

Meanwhile, Trump has been haranguing and insulting Powell for months to cut, even suggesting that he could oust the man he appointed in his first term to lead the Fed.

Trump said last week it’s “highly unlikely” that he would fire Powell, but others in the administration are pressuring the Fed in other ways. The White House has used cost overruns on the Fed’s headquarters renovation to accuse Powell of mismanagement. And on Monday, Treasury Secretary Scott Bessent told CNBC that “the entire Federal Reserve institution” should be examined.

The connection between lower rates and housing was not lost on Jim Reid, global head of macro research and thematic strategy at Deutsche Bank.

“This may explain the persistent pressure from Mr. Trump on the Fed to cut rates—perhaps he sees this as the most effective way to support the housing market,” he wrote in a note on Monday.

This story was originally featured on Fortune.com

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• Markets were little changed on Sunday ahead of a busy week for investors, who can expect another flood of corporate earnings, economic data and comments from central bankers. Meanwhile, upper-house parliamentary election results from Japan could ripple through global bond markets and jolt U.S. Treasury yields.

U.S. stocks signaled a calmness on Sunday night that belied a busy week ahead that includes a flood of corporate earnings, economic data and comments from central bankers.

Futures tied to the Dow Jones Industrial Average ticked up 44 points, or 010%, reversing an earlier dip. S&P 500 futures were up 0.11%, and Nasdaq futures rose 0.17%, also turning higher.

The yield on the 10-year Treasury edged down 1.1 basis points to 4.42%. The U.S. dollar was flat against the euro and down 0.22% against the yen, after upper-house parliamentary elections in Japan delivered a disastrous blow to Prime Minister Shigeru Ishiba’s coalition.

Earlier forecasts for a poor result for Ishiba had already sent Japanese government bond yields to multi-year highs as investors expected the election to clear the way for more government spending and tax cuts.

Japan’s stock and bond markets are closed Monday, meaning U.S. Treasury yields may see a delayed response to the election later in the week. Higher Japanese yields could make U.S. debt less attractive to local investors, who have typically been big Treasury buyers.

Gold edged up 0.15% to $3,363.20 per ounce. U.S. oil prices rose 0.19% to $67.47 per barrel, and Brent crude climbed 0.12% to $69.36.

After big banks and Netflix reported quarterly earnings last week, more tech giants are due. Results for Tesla and Google parent Alphabet come out on Wednesday, while Intel reports on Thursday.

Other big names on deck include Verizon, Coca-Cola, Lockheed Martin, General Motors, RTX, Northrop Grumman, IBM, AT&T, Honeywell, and Union Pacific.

Among economic reports that are scheduled are two key housing datasets: existing home sales on Wednesday and new home sales on Thursday. They come amid growing signs of cracks in the housing market.

On Tuesday, Federal Reserve Chairman Jerome Powell and Governor Michelle Bowman are due to speak at a banking conference.

That’s as President Donald Trump and the White House have continued to wage a pressure campaign against Powell over rates and renovations at the central bank’s headquarters.

This story was originally featured on Fortune.com

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• With mortgage rates remaining high and looking unlikely to drop much anytime soon, the housing market outlook is quickly deteriorating. Moody’s Analytics chief economist Mark Zandi said he thinks a “red flare” is more appropriate for housing, just weeks after he sent off a “yellow flare.” Unless mortgage rates come down substantially, home sales, homebuilding and prices will slump, he warned.

The housing market is getting so weak that it’s poised to become a significant drag on overall economic growth, according to Moody’s Analytics chief economist Mark Zandi.

In a series of posts on X last week, he noted that he sent off a “yellow flare” on the housing market just a few weeks ago but now thinks a “red flare” is more appropriate as the outlook is already deteriorating.

“Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon,” Zandi warned. “That, however, seems unlikely.”

Existing home sales unexpectedly rose in May, but still marked the slowest sales pace for any May since 2009, further evidence that the typically busy spring selling season has been a bust.

Meanwhile, sales of new single-family homes sank 13.7% in May from the prior month, and single-family housing starts dropped 4.6% in June, with permits down as well.

“Home sales are already uber depressed, but homebuilders providing rate buydowns had been propping sales up,” Zandi said. “They are giving up. It’s simply too expensive. A big tell is that many builders are delaying their land purchases from the land banks. New home sales, starts, and completions will soon fall.”

He added that home prices had also held up well, but are now going sideways and set to turn lower as near-7% mortgage rates crush demand.

In fact, the latest Case-Shiller home price report showed a 0.3% monthly fall in the 20-city index in April, steeper than March’s downwardly revised 0.2% dip.

And the latest Housing Market Index survey from the National Association of Home Builders showed 38% of builders cut prices in July, up from 37% in June, 34% in May, and 29% in April.

Putting more downward pressure on prices is increased supply. Home listings have been climbing, as even homeowners with low, pre-pandemic mortgage rates eventually need to put those properties up for sale and buy new homes at higher rates.

“Given their demographic and job situations, locked-in homeowners must move,” Zandi added. “They can only work around these needs for so long.”

Conditions are so tepid that many homeowners who listed their properties are taking them off the market after failing to find a buyer at the price they were offering.

Delistings are up 35% year to date and 47% year over year in May, outpacing active listing growth of 28.4% and 31.5%, respectively, according to a Realtor.com report this month.

For Zandi, that all adds up to bad news for the overall economy, which is already feeling strains from President Donald Trump’s tariffs.

“Housing will thus soon be a full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy’s prospects later this year and early next,” he said.

Analysts at Citi Research issued a similar warning in May, when they pointed out that the economist Ed Leamer, who passed away in February, famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession.

Citi pointed to fewer permits for single-family-home construction and an increase in the effective supply of homes on the market amid weak demand. Median home prices of existing homes were also falling on a monthly basis.

“Residential fixed investment is the most interest rate sensitive sector in the economy and is now signaling that mortgage rates around 7% are too high to sustain an expansion,” Citi said.

This story was originally featured on Fortune.com

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• A closer look at recent economic data reveals a decline in discretionary spending on services, according to a recent note from Wells Fargo, which said the metric historically has fallen during or immediately after recessions. That belies the overall narrative on Wall Street that tariffs have not impacted the economy as much as feared.

Recent economic data have eased fears that President Donald Trump’s tariffs aren’t yet causing a downturn or spike in inflation, but Wells Fargo is more skeptical.

In a note on Tuesday, economists Tim Quinlan and Shannon Grein dismissed the “false narrative” that tariffs were having a benign impact, pointing out that consumer spending data has actually been revised much lower from more upbeat earlier readings.

“It never quite rang true that consumer spending was completely unfazed by the sudden implementation of tariffs,” they wrote. “This mirage was sustained by initial estimates of GDP growth that pegged the pace of inflation-adjusted Q1 consumer spending at 1.8% (annualized); that’s three-times faster than what it turned out to be in the third estimate—just 0.5%.”

In fact, data on services spending was even more skewed to the upside, as revisions put growth at just 0.6%, down from an initial print of 2.4%.

Those trends continued into the second quarter and constitute a clear warning sign largely being overlooked, namely that households are indeed reducing their discretionary spending, according to the note.

While discretionary spending on goods has held up, spending on services is down 0.3% through May on a year-over-year basis.

“That is admittedly a modest decline, but what makes it scary is that in 60+ years, this measure has only declined either during or immediately after recessions,” Quinlan and Grein warned.

They pointed out that spending on food services and recreational services, which includes things like gym memberships and streaming subscriptions, were barely higher.

Meanwhile, transportation spending was down 1.1%, led by declines in auto maintenance, taxis and ride-sharing, and air travel, which had the steepest drop at 4.7%.

“The fact that households are putting off auto repair, not taking an Uber and cutting back or eliminating air travel points to stretched household budgets,” Wells Fargo said.

Even increases in spending on goods seem weaker than they appear, as categories like cars and appliances saw big surges that haven’t been sustained. That’s because consumers rushed to buy items before Trump’s tariffs hiked prices, pulling forward purchases to earlier in the year.

In addition, the muted inflation data appears misleading too, the economists wrote. Many businesses stockpiled extra inventory ahead of tariffs and have been able to draw on those supplies, allowing them to avoid passing on tariffs costs to consumers for now.

Trump’s on-again, off-again approach to tariffs may also be delaying those pass-throughs and even encouraging some businesses to eat the costs, especially if tariffs are seen as a temporary negotiation tactic, they added.

“Another too-good-to-be-true development with respect to tariffs is how broad measures of inflation have yet to register a worrying inflationary shock,” Quinlan and Grein said.

Others on Wall Street are less downbeat but still see tariffs weighing on the economy. Capital Economics sees tariffs causing a slowdown but not a recession, forecasting GDP growth of 1.6% this year and 1.5% next year.

JPMorgan expects growth of 1% in the third quarter, about steady with gains in the first half of the year, which saw a contraction in Q1 and a rebound in Q2.

Wells Fargo’s more contrarian view comes amid a sharp debate over the economic outlook and whether the Federal Reserve should resume rate cuts sooner rather than later.

Fed Governor Christopher Waller has pointed to weak job readings in arguing for a rate cut this month. But other policymakers prefer to wait, saying the economy has been resilient while tariffs have yet to full show up in the inflation data.

The retail sales report released on Friday showed a bigger-than-expected jump last month with broad gains. But that dataset mostly covers spending on goods.

Meanwhile, the latest consumer price index came in below expectations again, but still showed signs that tariffs were putting upward pressure on inflation as well as indications that weak demand may be limiting the ability of businesses to hike prices even higher.

“Consumer spending is simply not as sturdy as we previously thought it was or even as it was first reported to be,” Wells Fargo said. “We’ve long held the view that a stable labor market can offset tariff-induced inflation, and that may still be true and would prevent more of a recessionary impulse from ensuing. But consumers have shifted their behavior in the wake of tariffs.”

This story was originally featured on Fortune.com

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• As President Donald Trump continues to put pressure on Federal Reserve Chairman Jerome Powell, an earlier standoff between the two men could offer clues on how their current one might play out. In 2019, like today, Trump demanded the central bank hurry up and cut rates, raising questions about Powell’s future as Fed chief and whether he would step down.

Federal Reserve Chairman Jerome Powell signaled in 2019 that he would rather go down with the ship than save his own skin and compromise the independence of the central bank.

As President Donald Trump continues to put pressure on Powell, an earlier standoff between the two men could offer clues on how their current one might play out.

In 2019, like today, Trump demanded the Fed hurry up and cut rates amid a trade war he had launched, raising questions about Powell’s future as Fed chief and whether he would step down.

During a House Financial Services Committee hearing in July of that year, Powell was asked by then-Chairwoman Maxine Waters, “If you get a call from the president today or tomorrow and he said ‘I’m firing you. Pack up and it’s time to go.’ What would you do?”

“Of course I would not do that,” Powell replied.

“I can’t hear you,” Waters said, prompting laughter in the chamber.

“The answer would be ‘no,’” Powell reiterated.

“You think the president doesn’t have the authority. Is that why you would not leave?” Waters asked.

“The law clearly gives me a four-year term, and I fully intend to serve it,” Powell said.

According to the 2022 book Trillion Dollar Triage by Wall Street Journal reporter Nick Timiraos, he was even more adamant in private about not stepping down early.

“I will never, ever, ever leave this job voluntarily until my term ends under any circumstances. None whatsoever. You will not see me getting in the lifeboat,” Powell told a reporter that spring. “It doesn’t occur to me in the slightest that there would be any situation in which I would not complete my term other than dying.”

For Powell, who was first appointed Fed chief by Trump, the top priority was to ensure the U.S. economy continued to expand but also to preserve the Fed as an institution, including its independence, according to the book.

Weeks after that House hearing, the Fed lowered rates a quarter point, but Trump kept haranguing and insulting Powell, calling for even more easing.

Given that history, Powell’s tenure became an issue again after Trump was re-elected. In November, Powell was asked whether he would step down if asked by Trump. He replied no, adding later that it’s “not permitted under the law” for the president to fire or demote him or any other Fed governors in leadership positions.

Months later, Trump imposed sweeping tariffs across U.S. trading parters, raising fears of stagflation—weak economic growth coupled with high inflation. While inflation hasn’t spiked yet and growth remains intact, the Fed has held off on lowering rates, drawing the ire of Trump.

On Wednesday, Trump said it was “highly unlikely” that he would fire Powell, while confirming that he had discussed the “concept” of dismissing him with House Republicans during a White House meeting Tuesday night.

Still, Trump and other White House officials have continued to attack Powell over renovations at the Fed’s headquarters, accusing him of mismanagement.

Democratic Sen. Elizabeth Warren, a longtime critic of Powell, suggested the renovation issue was “a pretext to get him fired.” Meanwhile, JPMorgan CEO Jamie Dimon and other chiefs at top banks said this past week that central bank independence is crucial to the economy and financial markets.

Powell’s term as chairman of the board of governors expires in May 2026, but his term as a governor extends to January 2028. That means he would still be eligible to serve as chairman of the rate-setting Federal Open Market Committee, if he chooses to stick around as governor.

Historically, the board chair has also been FOMC chair, but the law allows the FOMC to determine its own internal organization. So it’s possible one person could serve as Fed board chair, and a different person could serve as FOMC chair.

On Tuesday, Treasury Secretary Scott Bessent said moves to replace Powell are under way and suggested that he should consider stepping down from the Fed entirely once his chairmanship ends.

“Traditionally, the Fed chair also steps down as a governor,” he told Bloomberg. “There’s been a lot of talk of a shadow Fed chair causing confusion in advance of his or her nomination. And I can tell you, I think it’d be very confusing for the market for a former Fed chair to stay on also.”

This story was originally featured on Fortune.com

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