Federal Reserve Major Debate: When Should the Tenure of “Number Three” Williams End?

There is an ongoing debate within the Federal Reserve over a rarely discussed rule—specifically, when New York Fed President John Williams should step down. This dispute reflects a deeper power struggle between Washington and the regional Fed banks.

According to Bloomberg, citing informed sources, the focus of the debate is whether Williams can serve until June 2028 (completing a full 10-year term), or whether internal regulations require him to retire early in June 2027 upon reaching the retirement age of 65.

Williams himself has made it clear that he expects to serve until June 2028.

The timing of this debate is particularly sensitive. If Williams steps down a year early, current Fed Chair Walsh would have a rare opportunity to influence the selection of the successor to one of the most influential regional positions within the Federal Reserve System ahead of schedule.

Analysts point out that, given the general wariness among regional Feds toward increased regulatory intervention from Washington, any move to forcibly shorten Williams’s tenure could easily be perceived as political manipulation.

The Federal Reserve’s internal regulations require regional Fed presidents to retire at age 65, but if they were over 55 when taking office, they are generally granted an exemption, allowing them a full 10-year term.

In 2017, the New York Fed Board of Directors unanimously approved a waiver allowing then-president William Dudley to continue serving after turning 65 in January 2018; Dudley retired in June that year.

The core issue in discussions regarding Williams’s departure is whether his prior tenure as President of the San Francisco Fed (2011–2018) should count toward his 10-year term. If it does, reaching the 10-year limit in 2028 comes into question; if not, then the 10-year term would start from when he took over the New York Fed in 2018.

According to Bloomberg, Peter Conti-Brown, a central bank historian and academic at the University of Pennsylvania, stated that relevant regulations governing central banks support both interpretations, but the Board in Washington holds final discretion and can enforce its view through dismissal if necessary.

Conti-Brown expects the Board will ultimately avoid direct confrontation and tacitly allow Williams to serve until 2028. He noted, "Otherwise, at a time when regional Feds are already wary of Washington’s consolidation of power, this move would make it look as though John Williams was effectively fired."

Derek Tang, an economist at Monetary Policy Analytics, also listed both possible departure dates for Williams in a recent client note and commented, "The fact that these questions are even being raised is itself highly unusual."

With 15 years at the Fed, Williams’s record surpasses even Powell’s, making him the longest-serving current official (Powell, though no longer chair, remains on the Board).

After receiving a Ph.D. in economics from Stanford University in 1994, Williams joined the Fed’s Washington headquarters, moved to the San Francisco Fed in 2002, was promoted to research director in 2009, and in 2011, succeeded his mentor Janet Yellen as San Francisco Fed President when she left for Washington to become Vice Chair.

In 2018, Williams transitioned to the New York Fed, providing then-chair Powell with a crucial monetary policy ally, thus forming the Federal Reserve’s leadership triangle with the chair and vice chair.

The New York Fed President is the only regional Fed president with a permanent vote on the FOMC, acts as the Fed’s “eyes and ears” on Wall Street, and plays a key role in addressing financial crises.

Academically, Williams, together with the late economist Thomas Laubach, co-developed the benchmark model for estimating the “neutral rate of interest”—the level that is neither stimulative nor contractionary to the economy—a model still widely cited in the industry today.

Given that Walsh rarely comments publicly on the economic outlook and rate paths, Williams’s remarks carry particular weight in the markets.

According to reports, on September 29 this year, Williams stated that another rate hike "later this year" may be appropriate. This comment immediately triggered a re-pricing in the market—federal funds futures contracts showed traders’ expectations for an October rate hike dropping sharply from around 70% to about 50%.

It is noteworthy that the appointment process for New York Fed President differs from that of the Fed Board members. The latter are nominated by the U.S. President and confirmed by the Senate, while regional Fed presidents are selected by certain Board Directors and then approved by the seven-member Board of Governors.

Currently, the New York Fed Board of Directors has not announced the initiation of a formal presidential selection process, a procedure that typically takes several months.