Walsh's nomination failed; the Federal Reserve chair position may be vacant.

As of March 12, 2026, Federal Reserve Chair Powell's term will end on May 15, but the nomination of his successor, Kevin Walsh, has stalled due to opposition from Republican Senator Thom Tillis. Tillis is blocking any progress on Federal Reserve nominations citing the Justice Department's ongoing criminal investigation into Powell, causing Walsh's nomination to be held up in the Senate Banking Committee. The current situation is:

1. Procedural deadlock: In the Senate Banking Committee, although Republicans hold 13 seats (Democrats 11), Tillis's opposition prevents Walsh's nomination from gaining majority support. If the deadlock continues, Powell's departure could result in a vacant chair position.

2. Investigation controversy: The Justice Department is investigating Powell regarding his testimony in a Federal Reserve building renovation project. Tillis views this as political pressure and insists on not approving the nomination until the investigation concludes, to preserve the independence of the Federal Reserve.

3. Time pressure: Powell's chairmanship has only 65 days remaining. Even if the committee approves the nomination, it still requires a full Senate vote, making the timeline tight. If not confirmed in time, the Vice Chair may serve as Acting Chair.

4. Market impact: Walsh is seen as a supporter of rate cuts. The stalled nomination increases uncertainty around monetary policy, potentially affecting inflation expectations and market stability.

5. Bipartisan stance: Democrats are unanimously opposed to Walsh, viewing the nomination as an attempt by Trump to control the Federal Reserve; Republicans are divided due to Tillis's defection, highlighting the politicization of the Federal Reserve's independence.

Therefore, the market's expectation of rate cuts has been significantly reduced!