Fed Watch – 4/17/2026

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hi, I’m Lauren Saidel-Baker and thank you so much for joining me for this April 17th edition of Fed Watch.

Well, in a relatively quiet data week, I think it’s worth looking back at some of the political headlines surrounding the Federal Reserve. This week we saw back and forth essentially between President Trump and Chair Powell about the timing of when Powell’s successor will take over as chair of the Fed. So technically, Powell’s chair ends on May 15th. However, there is a mechanism for him to stay on as chair until first of all, his successor is confirmed, which he has said he would do, but he’s also made the announcement that he’d like to stay in place to see the Fed through this Justice Department investigation until all allegations of wrongdoing are dropped and the Fed can move forward. 

So can he do that? Trump has come out and said that he would fire Powell if Powell did not in fact step down. So there are a couple of legal questions at play. The first one is technically the chair term only runs four years against the governorship of a Federal Reserve board member, which runs 14 years. So while Powell’s chair as term ends May 15th of this year, he actually is still a governor of the Federal Reserve through January, 2028. There are some questions about how long he’ll stay on in that role, he might, he might not. But regardless, after this May 15th date, there’s some question about whether Trump could name an interim chair and Myron is the name that keeps coming to the forefront in that context. Just until Warsh, his official nominee, is moves through Senate confirmation processes is finally confirmed to take over that position. If we look back to the question and we have discussed this in some detail in the past on this podcast of whether President Trump could fire the chair of the Fed. The precedent that we have to go off is the Federal Reserve Act of 1913 and it says that the chair can only be removed for cause. Trump has pushed some of the executive powers, however, in other contexts, and this could be another one where we start to see him push legal precedent. At issue today, we do have a few Supreme Court cases, most notably the Cook case about whether or not Trump can have wrongdoing apply in these circumstances. In this case, a decision is expected likely in June, so we’ll probably have to wait just a little bit longer to see the Supreme Court weigh in on whether or not Fed governors are protected from that level of firing. More to come on this and again, what this means for the market is very clearly a question of Fed credibility. If we do see overt political influence to pressure interest rates, to pressure specific individuals in these positions, the market might start to get worried. So we are taking our cues, not from the Fed themselves, but as we at ITR have historically done, really looking to the bond market to give us the signal about what the market thinks going forward.

I do also wanna turn to one data point, one key indicator that we follow here at ITR. We call it non-defense capital goods new orders, excluding aircraft. It’s really a mouthful to say, but if you follow us in say the trends report or some of our other forecasting programs, you’re probably familiar with this one as our benchmark for business to business spending.  Now we’ve been talking a lot about the pace of confidence picking back up, the pace of business investment starting to gain steam. I did want to give a quick update on the data that’s come in more recently. It’s running, if anything, a little bit high compared to our forecast range. So we’re keeping that forecast in place for now, but still within range, but watching to the upside, not to the downside. That’s been my one bit of good news for the week, hopefully getting you through this Friday and into the weekend.

I hope you’ll be back with us next week as we do unpack more of this data, the political headlines, whatever they may be. Join us then right here on Fed Watch.