Trump rushing to reform Federal Reserve prior to crucial interest rate decision announcement
The Federal Reserve is set to vote on the nation's benchmark interest rate this week, amidst a shake-up in its board of governors. President Donald Trump has moved to fire one member of the Fed's board of governors and secure Senate confirmation for another.
Stephen Miran, a current member of the Trump administration, has been confirmed as a member of the Board of Governors of the Federal Reserve by the Senate. Adrianna Kugler's term on the Fed board has been filled by Miran. Miran has vowed to safeguard central bank independence, a commitment that is crucial in maintaining the Fed's credibility and effectiveness.
However, tensions have been high between the White House and the Fed. Trump has been critical of the Fed and its Chair, Jerome Powell, for not lowering interest rates as he desired. This criticism has intensified as the federal funds rate stands between 4.25% and 4.5%, a sharp increase in response to a pandemic-era bout of inflation.
Powell has hinted at the possibility of an interest rate cut, a move that investors predict with a 96% chance. The vote is aimed at steering the economy through slow hiring and rising inflation. Twelve policymakers will participate in the vote, including the two Federal Reserve policymakers who are currently uncertain and undecided about attending the planned meeting on Wednesday.
Lisa Cook, another member of the Fed's board, has sued Trump over her attempted ouster. The Trump administration has requested to remove Cook by Monday, before the scheduled vote on interest rates. A federal judge issued a preliminary injunction requiring Cook to continue serving as a governor of the Federal Reserve System while her lawsuit moves through the courts.
It is worth noting that federal law allows the president to remove a member of the Fed board "for cause," but no president has attempted such a removal in the central bank's 112-year history.
Stephen Miran plans to take an unpaid leave of absence from his current role to focus on his duties at the Fed. He has also stated that he does not plan to resign from his position within the Trump administration.
The vote this week is significant, marking the first adjustment to interest rates since five meetings and nine months ago. The outcome could have far-reaching implications for the US economy, and the world economy at large, as the Fed seeks to navigate the complex challenges posed by inflation and slow hiring.
