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  • Trump’s Appointees Could Rule the Fed for Decades

    Note: Powell was appointed as governor by Obama and nominated as chair by Trump.

    When President Trump took office in 2025, just two of the seven seats on the Federal Reserve’s Board of Governors were held by his appointees. He had also elevated Jerome H. Powell to the chair position during his first term.

    Note: Powell was appointed as governor by Obama and nominated as chair by Trump.

    A seat opened up earlier this month when a Biden appointee stepped down. And on Monday, Mr. Trump announced that he was planning to fire another Biden-appointed member of the board. If he succeeds, a majority of the Federal Reserve Board will have been appointed by Mr. Trump.

    Notes: Kugler announced her resignation Aug. 1, and it took effect Aug. 8.

    Mr. Trump has made no secret of his desire to reshape the top ranks of the Fed, repeatedly lashing out at Mr. Powell and his colleagues for keeping interest rates too high.

    Mr. Trump’s first opportunity to remake the Fed roster came sooner than expected with the resignation of Adriana D. Kugler. He is working to create another with the firing of Lisa D. Cook over allegations of mortgage fraud. Fed governors can be fired only “for cause,” generally understood to mean gross misconduct.

    Ms. Cook, who has not been charged with wrongdoing or convicted of a crime, said she would not leave, and her lawyer said she would sue to challenge the dismissal. In a statement, a spokesman for the Fed emphasized the central bank’s independence but said it would “abide by any court decision.”

    If Mr. Trump succeeds in removing Ms. Cook, he will be able to appoint another governor to serve out her term, which ends in January 2038.

    Mr. Trump has already nominated Stephen Miran, his top economic adviser, to serve out Ms. Kugler’s term.

    With Cook’s dismissal, Trump-appointed board members could soon be a majority at the Fed

    Presidents appoint Fed governors to staggered 14-year terms, meaning one term expires every two years. The structure is meant to safeguard the Fed’s independence, preventing a president from packing the board and ensuring the Fed governors can consider a longer-term horizon than Congress or the president.

    “The idea is that you can do something for the long-term health of the country that could be a short-term political loss,” said Aaron Klein, a senior fellow at the Brookings Institution.

    In reality, most do not serve out the full 14 years, and previous presidents have had the opportunity to appoint multiple board members.

    But in the past, board nominations were relatively nonpartisan, Mr. Klein said.

    “Governors were routinely nominated by one party and renominated by the other,” he said, pointing to Mr. Powell as an example. Mr. Powell, a registered Republican, was appointed to the board by President Barack Obama, nominated as chair by Mr. Trump and renominated by President Joseph R. Biden Jr.

    But this time, Mr. Klein said, Mr. Trump is seeking to install loyalists who favor his economic policies. “What is unique is that these are governors who are likely to do what Trump says, and if not, he’ll fire them.” Mr. Klein added that Mr. Trump’s actions, if allowed to proceed, would “eviscerate” the principle of central bank independence.

    Mr. Trump’s nominees would need to be confirmed by the Senate, which is back in session Sept. 2 — in time for the Fed’s next rate-setting meeting Sept. 16-17.

    During last month’s meeting, Christopher J. Waller and Michelle W. Bowman, both Trump appointees, voted against the central bank’s decision to leave interest rates unchanged, preferring instead to cut rates.

    In a twist of timing, Mr. Powell just last week gave his strongest indication yet that the central bank was ready to resume rate cuts as soon as September.

    Another key opportunity to reshape the board will arise in May, when Mr. Powell’s term as chair is set to expire. He can then stay on as governor until January 2028. That would be atypical; most of the time, Fed chairs step down to avoid undercutting the authority of the new chair. Mr. Powell has declined to share his plans.

    The power of the Federal Reserve Board goes beyond voting on rates. Members also approve and reappoint the Fed’s regional presidents, who are responsible for financial regulation in their region, including funding for bailouts. In February, all 12 presidents’ terms will expire, and they will need to be reappointed by the board.

    What is typically a pro forma matter could provide Mr. Trump with another opportunity to overhaul the Fed system, Mr. Klein said.

    “A Trump-loyal Board of Governors could get rid of them all,” he said.

    Lily Boyce and Christine Zhang

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  • Fed’s Waller, unimpressed by inflation data, calls for two more rate hikes this year

    Fed’s Waller, unimpressed by inflation data, calls for two more rate hikes this year

    Federal Reserve Board Gov. Christopher Waller said Thursday he was not swayed by June’s benign consumer inflation data, and said he wants the central bank to go ahead with two more 25-basis-point rate hikes this year.

    “I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target,” Waller said in a speech to bond-market experts, known as The Money Marketeers of New York University.

    That would bring the Fed’s benchmark rate to a range of 5.5%-5.75%.

    Waller said that, while the cooling of CPI data for June was welcome news, “one data points does not make a trend.”

    “The report warmed my heart, but I have got to think with my head,” Waller said.

    He noted that inflation slowed in the summer of 2021 before rocketing higher.

    In his remarks, Waller said he is now more confident that the contagion from the collapse of Silicon Valley Bank in March will not create a significant problem for the economy.

    “I see no reason why the first of those two hikes should not occur at our meeting later this month,” he said.

    Traders in derivative markets have priced in high odds of a rate hike after the Fed’s meeting in two weeks. But traders have been skeptical the Fed will follow through with a second hike, even before the soft CPI data.

    Waller said the timing of the second hike depends on the data.

    “If inflation does not continue to show progress and there are no suggestions of a significant slowdown in economic activity, then a second 25-basis-point hike should come sooner rather than later, but that decision is for the future,” he said.

    During a question-and-answer session, Waller stressed that September was a “live meeting,” meaning the Fed could hike rates at that time.

    Some economists had thought the Fed was moving to an “every-other-meeting” pace of hikes, but Waller said he did not favor such mechanical moves, and that data should be the deciding factor.

    Some Fed officials want the central bank to hold rates steady in July, and perhaps through the end of the year, thinking the economy is going to be hit by “lagged” effects from past rate hikes.

    Waller said he believes the bulk of the effects from last year’s tightening have passed through the economy already.

    “Pausing rates now, because you are waiting for long and variable lags to arrive, may leave you standing on the platform waiting for a train that has already left the station,” he said.

    The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.786%
    has fallen to 3.77% this week after a lower-than-expected gain in jobs in the June report and the cooling of inflation. The yield had hit a recent high of 4.07% ahead of those softer reports.

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  • Fed’s Waller says market has overreacted to consumer inflation data: ‘We’ve got a long, long way to go’

    Fed’s Waller says market has overreacted to consumer inflation data: ‘We’ve got a long, long way to go’

    Federal Reserve Gov. Christopher Waller said Sunday that financial markets seem to have overreacted to the softer-than-expected October consumer price inflation data last week.

    “It was just one data point,” Waller said, in a conversation in Sydney, Australia, sponsored by UBS.

    “The market seems to have gotten way out in front over this one CPI report. Everybody should just take a deep breath, calm down. We’ve got a ways to go ” Waller said.

    Investors cheered the soft CPI print, released Thursday, driving stocks up to their best week since June. The S&P 500 index
    SPX,
    +0.92%
    closed 5.9% higher for the week.

    The data showed that the yearly rate of consumer inflation fell to 7.7% from 8.2%, marking the lowest level since January. Inflation had peaked at a nearly 41-year high of 9.1% in June.

    Waller said it was good there was some evidence that inflation was coming down, but noted that there were other times over the past year where it looked like inflation was turning lower.

    “We’re going to see a continued run of this kind of behavior and inflation slowly starting to come down, before we really start thinking about taking our foot off the brakes here,” Waller said.

    “We’ve got a long, long way to go to get inflation down. Rates are going keep going up and they are going to stay high for awhile until we see this inflation get down closer to our target,” he added.

    The Fed is focused on how high rates need to get to bring inflation down, and that will depend solely on inflation, he said.

    Waller said “the worst thing” the Fed could do was stop raising rates only to have inflation explode.

    The 7.7% inflation rate seen in October “is enormous,” he added.

    The Fed signaled at its last meeting earlier this month that it might slow down the pace of its rate hikes in coming meetings.

    The central bank has boosted rates by almost 400 basis points since March, including four straight 0.75-percentage-point hikes that had been almost unheard of prior to this year.

    “We’re looking at moving in paces of potentially 50 [basis points] at the next meeting or the next meeting after that,” Waller said.

    The Fed will hold its next meeting on Dec. 13-14, and then again on Jan. 31-Feb. 1.

    At the same time, Powell said the Fed was likely to raise rates above the 4.5%-4.75% terminal rate that they had previously expected.

    “The signal was ‘quit paying attention to the pace and start paying attention to where the endpoint is going to be,’” Waller said.

    In the wake of the CPI report, investors who trade fed funds futures contracts see the Fed’s terminal rate at 5%-5.25% next spring and then quickly falling back to 4.25%-4.5% by November. That’s well below the levels prior to the CPI data.

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