Federal Reserve policymakers kicked off a two-day meeting Tuesday with newly-confirmed Trump appointee Stephen Miran and a governor the president has targeted for removal, Lisa Cook, both eligible to attend following a close Senate confirmation vote and court ruling.
While the Fed on Wednesday is expected to approve the first interest rate cuts since December, a long-term battle over its independence could drag on for months.
The Aug. 8 resignation of Governor Adriana Kugler, a Biden appointee, gave Trump the opportunity to nominate Stephen Miran, chair of the White House Council of Economic Advisers, to serve out the rest of Kugler’s term, which expires in January.
With Miran confirmed Monday in a 48-47 Senate vote (Republican Sen. Lisa Murkowski of Alaska joined Democrats in voting against confirmation), Trump is now focused on ousting Cook over allegations that she claimed two homes as primary residences.
Cook won an appeals court victory Monday, upholding a Sept. 10 decision by U.S. District Court Judge Jia Cobb that she can remain on the central bank’s board while she contests the legality of President Trump’s Aug. 25 order removing her from her position.
Cook’s claim that she has been denied due process “is very likely meritorious,” so at this point, there is no need to address whether the allegations against her would meet the definition of “for cause” in the Federal Reserve Act, Judges Bradley Garcia and Michelle Childs wrote in a 2-1 ruling.
“Cook has been serving in her position continuously despite the President’s purported termination,” Biden appointees Garcia and Childs wrote. “Granting the government’s request for emergency relief would thus upend, not preserve, the status quo.”
Trump appointee Judge Gregory Katsas dissented, saying judicial reviews can take months or years, enabling “a potentially compromised Governor to engage in significant governmental action — such as voting on whether to adjust interest rates, which Cook says she must do tomorrow.”
The Trump administration has indicated it will ask the Supreme Court to weigh in. If the president succeeds in removing Cook, he will have appointed four of the seven members of the Fed’s Board of Governors.
Given the intense pressure the Trump administration has put on Fed Governor Jerome Powell to lower rates, there’s speculation that it might use the Board of Governors’ authority to approve or reject appointments of regional bank presidents in February to exert more control over the central bank.
Economists and investment analysts say that the Trump administration’s attempts to undermine the Fed’s independence could have the unintended side effect of sending mortgage rates higher.
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