So we're in a holding pattern. That's how President Donald Trump described the current situation with Federal Reserve Chair Jerome Powell during a Wednesday interview with Reuters. Translation: Powell isn't getting fired today, but nobody's making any promises about tomorrow.

Trump made it clear he has no immediate plans to dismiss Powell, despite an ongoing criminal investigation by the Department of Justice targeting the Fed chair. When pressed for details about what comes next, Trump kept things vague, saying it was "too soon, too early" to elaborate. Not exactly reassuring if you're Powell.

The president is already eyeing replacements, though. He mentioned former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett as potential candidates for the top job. Treasury Secretary Scott Bessent won't be in the running because he wants to stay where he is, according to Trump. Expect an announcement on the next Fed Chair within the "next couple of weeks," Trump said.

The Renovation Project That Won't Go Away

This whole drama centers on the Federal Reserve's $2.5 billion renovation project. The DOJ probe claims Powell misled Congress about it, but a recent letter from Powell to senators laying out details about the project seems to undercut those accusations. It's a messy situation that keeps getting messier.

Over on Kalshi, traders are putting 44% odds on Trump attempting to remove Powell from both his chairmanship and his Board of Governors seat before 2027. Powell's chair term ends in May anyway, but his governor role continues for two more years. The betting markets suggest people think Trump might not wait.

Why Economists Are Freaking Out

Trump's threats to jail Powell over the renovation project have economists sounding alarm bells. Justin Wolfers warned that threatening to imprison a central bank chair is the kind of move you see in authoritarian regimes in Argentina, Russia, and Venezuela, not exactly role models for monetary stability. His concern? Such actions could spark fears of hyperinflation.

Former Federal Reserve Chair Janet Yellen weighed in too, calling the DOJ probe "extremely chilling" for the Fed's independence. She expressed surprise that financial markets haven't reacted more strongly, noting that "it seems to me that the market should be concerned." When a former Fed chair starts saying markets aren't worried enough, that's usually worth paying attention to.