President Trump’s plans for a more receptive Fed may have backfired so spectacularly that Jerome Powell may end up staying as chairman beyond the end of his term, while Stephen Miran, Trump’s most loyal supporter on the bank’s rate-setting committee, leaves the institution. Trump has repeatedly taken aim at the chair of the U.S. Federal Reserve—often via personal insults—since launching his presidential bid. First, he wanted Powell to hold interest rates higher to avoid boosting President Biden’s ratings on the economy. After he won the Oval Office, he began lobbying for lower rates and has gone to unusual lengths to shape monetary policy, including multiple legal threats.Last week, he achieved a key aim: finding a replacement for Powell (whose term as Fed chair ends in May) who is suitably dovish, but isn’t seen as so close to the White House that it would spook markets.
Kevin Warsh, a former Fed governor under Ben Bernanke, didn’t upset markets beyond potentially adding to the decline in precious metal prices with his hawkish tone on the central bank’s balance sheet. But Warsh may not shape the tone of conversations on the base-rate-setting Federal Open Market Committee (FOMC) as quickly as Trump might have hoped.
