Fed Governor Adriana Kugler announced Friday she is stepping down from her position earlier than expected, giving President Donald Trump the chance to expand his influence over the central bank as he calls for a revolt against Chairman Jerome Powell.
In a post on Truth Social before Kugler’s announcement, President Trump took a jab at Powell, saying he must “substantially” lower interest rates, after the Federal Open Market Committee voted overwhelmingly to keep rates unchanged.
“IF HE CONTINUES TO REFUSE, THE BOARD SHOULD ASSUME CONTROL, AND DO WHAT EVERYONE KNOWS HAS TO BE DONE,” Trump added in the post.
Kugler said she would resign her position on Aug. 8, earlier than her expected departure in January when her term on the board of governors expires. She plans to return to Georgetown University as a professor this fall, according to a press release.
Kugler’s departure gives Trump a relished opportunity to nominate a voting member to the FOMC and expand his influence. The FOMC sets the federal funds rate that Trump has been saying needs to come down. The committee is made up of the seven governors who serve on the Fed board, the New York Fed president, and four rotating regional Federal Reserve bank presidents.
The FOMC meeting this week that kept rates unchanged between 4.25% and 4.5% saw the dissent of two Fed governors, Trump appointees Michelle Bowman and Christopher Waller.
It marked a rare break in what’s a typically unanimous vote, but it was far from a mutiny, said Michael Ashley Schulman, the chief investment officer of Running Point Capital Advisors.
Because interest rate decisions are decided by a simple majority vote by the FOMC’s 12 voting members, it’s possible Powell, who only gets one vote and no veto power, could be overridden. But it’s not likely, said Schulman.
“A handful of dissents shows the committee can grumble, but a successful revolt would need at least seven ‘nays’ against Powell, an inside-the-Fed version of turning the Succession board on Logan Roy,” he told Fortune, referring to the TV show about a corporate power struggle. “Odds remain low unless the data roll over hard or new appointees tip the balance.”
Trump’s attacks on the Fed and Powell have escalated in his second term. And his constant insistence on lower rates and previous threats to appoint Powell’s successor, have put pressure on the Fed to exert its independence.
Yet, Powell still has ways he can fight back against Trump’s influence, if he chooses to, said Mark Spindel, senior adviser at F/m Investments and a co-author of The Myth of Independence: How Congress Governs the Federal Reserve.
Powell has made clear he will serve out the remainder of his term as Fed chairman until it expires in May, yet Spindel notes Powell can also remain on the board of governors afterwards because his term on the board, which ends in 2028, is independent of his four-year term as chairman.
“Powell sticking around for a while after his chairmanship would be a scenario by which he could keep the president from attaining a majority of the board of governors, preventing all sorts of weird dynamics, and making communication by the incoming chair more difficult,” Spindel told Fortune.
Powell has repeatedly declined to say whether he intends to stay on as Fed governor after his term as chairman ends.
It’s also unclear how Trump will react if the Fed cuts rates. The economy has been largely resilient in spite of uncertainty caused in part by the threat of tariffs on major U.S. trading partners, but cracks have started to emerge. The U.S. economy added only about 73,000 jobs last month, and gains in June and May were revised down sharply, according to the Bureau of Labor Statistics.
The new numbers were so stunning they upended the earlier narrative that the labor market was remarkably shock proof, which has colored the Fed’s stance on rates.
In the press conference following the Fed’s decision to keep rates unchanged, Powell hesitated to guide toward a rate in the coming months. He struck a hawkish tone, according to a note by Bank of America’s macroeconomics team, putting a damper on investor hopes that the FOMC’s next meeting in September could bring a rate cut.
“It seems to me — and to almost the whole committee — that the economy is not performing as though restrictive policy is holding it back inappropriately,” Powell said.
