Trump to nominate top economic aide Stephen Miran to fill open spot on Federal Reserve board

Globe and Mail

16 hours ago

U.S. President Donald Trump said Thursday he will nominate a top economic adviser to the Federal Reserve's board of governors for four months, temporarily filling a vacancy while continuing his search for a longer-term appointment.
Mr. Trump said he has named Stephen Miran, the chair of the White House's Council of Economic Advisers, to fill a seat vacated by governor Adriana Kugler, a Biden appointee who is stepping down Friday. Mr. Miran, if approved by the Senate, will serve until January 31, 2026.
The appointment is Mr. Trump's first opportunity to exert more control over the Fed, one of the few remaining independent federal agencies. Mr. Trump has relentlessly criticized the current chair, Jerome Powell, for keeping short-term interest rates unchanged, calling him 'a stubborn MORON' last week on social media.
Mr. Miran has been a major defender of Mr. Trump's income-tax cuts and tariff hikes, arguing that the combination will generate enough economic growth to reduce budget deficits. He also has played down the risk of Mr. Trump's tariffs generating higher inflation, a major source of concern for Mr. Powell.
Trump calls on Federal Reserve board to usurp Powell and take control of central bank
The choice of Mr. Miran may heighten concerns about political influence over the Fed, which has traditionally been insulated from day-to-day politics. Fed independence is generally seen as key to ensuring that it can take difficult steps to combat inflation, such as raising interest rates, that politicians might be unwilling to take.
Federal Reserve governors vote on all the central bank's interest-rate decisions, as well as its financial regulatory policies.
Mr. Miran's nomination, if approved, would add a near-certain vote in support of lower interest rates. Ms. Kugler had echoed Mr. Powell's view that the Fed should keep rates unchanged and further evaluate the impact of tariffs on the economy before making any moves.
Mr. Trump has said he will appoint a Fed chair who will cut interest rates, which he says will reduce the borrowing costs of the federal government's huge US$36-trillion debt pile. Mr. Trump also wants lower rates to boost moribund home sales, which have been held back partly by higher mortgage costs. Yet the Fed doesn't directly set longer-term interest rates for things like home and car purchases.
At its most recent meeting last week Fed officials kept their key rate unchanged at 4.3 per cent, where it has stood after three rate cuts late last year. But two Fed governors – Christopher Waller and Michelle Bowman – dissented from that decision. Both were appointed by Mr. Trump in his first term.
Opinion: A scary chart shows why diminished Fed independence may outlast this administration
Still, even with Mr. Miran on the board, 12 Fed officials vote on interest-rate policy and many remain concerned that Mr. Trump's sweeping tariffs could push inflation higher in the coming months.
Mr. Miran could be renominated to a longer term on the Fed once his initial appointment is concluded, or replaced by another nominee.
Mr. Powell's term as chair ends in May 2026. Yet, Mr. Powell could remain on the board of governors until January 2028, even after he steps down as chair. That would deny, or at least delay, an opportunity for Mr. Trump to appoint an additional policymaker to the Fed's board.
As a result, one option for Mr. Trump is to appoint Mr. Powell's eventual replacement as chair to replace Ms. Kugler once the remaining four months of her term are completed. Leading candidates for that position include Kevin Warsh, a former Fed governor from 2006 to 2011 and frequent critic of Mr. Powell's chairmanship, and Kevin Hassett, another top Trump economic adviser.
Another option for the White House would be to select Mr. Waller, who is already on the board, to replace Mr. Powell, and who has been widely mentioned as a candidate.
Marco Casiraghi, senior economist at investment bank Evercore ISI, noted that the choice of Mr. Miran could be a positive sign for Mr. Waller, because Mr. Trump did not take the opportunity to nominate someone likely to become chair once Mr. Powell steps down.
After the July jobs report was released last Friday, Mr. Miran criticized the Fed chair for not cutting benchmark interest rates, saying that Mr. Trump had been proven correct on inflation during his first term and would be again. The President has pressured Mr. Powell to cut short-term interest rates under the belief that his tariffs will not fuel higher inflationary pressures.
'What we're seeing now in real time is a repetition once again of this pattern where the president will end up having been proven right,' Mr. Miran said on MSNBC. 'And the Fed will, with a lag and probably quite too late, eventually catch up to the President's view.'
Last year, Mr. Miran expressed support for some unconventional economic views in commentaries on the Fed and international economics.
Last November, he proposed measures that would reduce the value of the dollar in order to boost exports, reduce imports and cut the U.S. trade deficit, a top priority for Mr. Trump. He also suggested tariffs could push U.S. trading partners, such as the European Union and Japan, to accept a cheaper dollar as part of a 'Mar-a-Lago Accord,' an echo of the Plaza Accord reached in the 1980s that lowered the dollar's value.
As a fellow at the conservative Manhattan Institute, Mr. Miran in March, 2024 also proposed overhauling the Fed's governance, including by making it easier for a president to fire members of its board of governors.
'The Fed's current governance has facilitated groupthink that has led to significant monetary-policy errors,' Mr. Miran wrote in a paper with Dan Katz, now a top official at the Treasury Department.