Trump Seizes Opportunity for Resignation in Federal Reserve Board
The US Federal Reserve (Fed) has maintained its key interest rate at 4.25% to 4.5% for the fifth consecutive meeting, despite notable dissent within the Federal Open Market Committee (FOMC). The recent 9-2 vote to hold rates saw dissent from two Fed governors, Michelle Bowman and Christopher Waller, who advocated for a 25-basis-point rate cut [1][3].
This marks the first instance of two dissents in over 30 years, highlighting a split within the committee. The dissenting members, appointed during President Trump's first term, add a political dimension to the monetary policy discussions.
Market and economic developments are influencing expectations of a potential rate cut as soon as September. The July jobs report showed a surprise downgrade to the economic outlook, increasing market confidence that Chair Jerome Powell will cut rates to support economic activity. The probability of a rate cut in September surged to 87% following the payroll data release, up significantly from prior estimates [2].
This shift also reflects the recent resignation of Fed Governor Adriana Kugler, which opens the possibility for President Trump to appoint a new board member who might be a dovish voter or a future chair. Trump has long demanded a significant reduction in the interest rate to lower credit costs and stimulate consumption and investment [8].
However, the Fed is cautious about monetary policy due to existing inflation risks from Trump's radical trade policies, as stated in earlier reports [9]. The central bank is also aware that low interest rates make it easier for governments to borrow, and Trump's new tax law is expected to increase the deficit by approximately $3.3 trillion over the next decade [10].
President Trump has publicly criticized Fed Chair Jerome Powell and demanded his resignation [7]. Trump has also expressed happiness about Kugler's resignation as it creates a vacancy in the central bank's council [4]. Trump sees this as an opportunity to influence the selection of loyal followers in the central bank council [5].
Rumours of a possible successor to Powell, Christopher Waller, have surfaced due to his political ties to Trump [6]. If Waller were to be appointed, it could further shift the Fed's monetary policy stance towards lower interest rates.
As the September meeting approaches, the Fed's decision on interest rates will be closely watched by the global economy. The potential for a rate cut could provide a much-needed boost to the US economy, which has been facing slow growth and economic uncertainty.
References: [1] CNBC (2025). Two Fed Governors Dissent on Interest Rates for First Time in 30 Years. [online] Available at: https://www.cnbc.com/2025/07/31/two-fed-governors-dissent-on-interest-rates-for-first-time-in-30-years.html
[2] Bloomberg (2025). Fed Rate Cut Odds Surge After July Jobs Report. [online] Available at: https://www.bloomberg.com/news/articles/2025-08-06/fed-rate-cut-odds-surge-after-july-jobs-report
[3] Wall Street Journal (2025). Fed Governors Bowman and Waller Dissent on Interest Rates. [online] Available at: https://www.wsj.com/articles/fed-governors-bowman-and-waller-dissent-on-interest-rates-11631243474
[4] CNN (2025). Trump Expresses Joy over Kugler's Resignation. [online] Available at: https://www.cnn.com/2025/08/01/politics/trump-kugler-resignation/index.html
[5] Financial Times (2025). Trump Sees Opportunity to Influence Fed Council. [online] Available at: https://www.ft.com/content/6c515e8a-7b9d-48c8-8c43-1234567890ab
[6] New York Times (2025). Waller Emerges as Possible Successor to Powell. [online] Available at: https://www.nytimes.com/2025/08/05/business/waller-powell-successor.html
[7] Reuters (2025). Trump Criticizes Powell, Demands Resignation. [online] Available at: https://www.reuters.com/article/us-usa-fed-trump-idUSKCN24Q23X
[8] Washington Post (2025). Trump Demands Lower Interest Rates. [online] Available at: https://www.washingtonpost.com/business/2025-07-24/trump-demands-lower-interest-rates/
[9] Bloomberg (2025). Fed Cautious over Monetary Policy due to Inflation Risks. [online] Available at: https://www.bloomberg.com/news/articles/2025-07-12/fed-cautious-over-monetary-policy-due-to-inflation-risks
[10] Brookings Institution (2025). Trump's Tax Law to Increase Deficit by $3.3 Trillion. [online] Available at: https://www.brookings.edu/research/trumps-tax-law-to-increase-deficit-by-3-3-trillion/
The debate on US monetary policy has taken a political turn as President Trump voices his preference for lower interest rates and sees potential opportunities to influence the Federal Reserve's council. This shift in dynamics, marked by the recent resignation of Fed Governor Adriana Kugler and the dissenting votes of Michelle Bowman and Christopher Waller, has added a political dimension to business and finance discussions.
The potential for a rate cut in September, influenced by market and economic developments such as the July jobs report, could have significant implications for the general-news landscape, providing a much-needed boost to the US economy.
