The Fed has just “put itself to the Trump test” by taking a unanimous decision to anticipate a possible reshuffle of its management.
The Federal Reserve’s anticipated reappointment of regional bank presidents surprised markets and allayed fears that the central bank would soon lose its independence as President Donald Trump continues to demand deeper rate cuts.
On Thursday, the Fed announced that 11 of its 12 bank presidents had been reappointed, except for Atlanta’s president, with Raphael Bostic previously announcing his resignation.
Presidents’ five-year terms were set to end in February, and past term renewals typically move closer to their expiration dates because they have historically been business as usual. But recent suggestions by the Trump administration that new conditions should be imposed on presidents have raised fears that it may seek a broader leadership shakeup.
Earlier this month, Treasury Secretary Scott Bessent imposed a three-year residency requirement on Fed chairs. A few days later, National Economic Council Director Kevin Hassett, who is the favorite to become the next Fed chairman, endorsed the idea.
Although Fed presidents are appointed by boards of directors from their respective districts, the Fed’s board of governors approves them. As a result, tipping the balance of power on the Fed board with Trump appointees could eventually give them the opportunity to reshape the Fed chairs as well.
Meanwhile, the Federal Interest Rate Setting Committee is made up of the seven members of the Fed’s board of directors, as well as five of the 12 Fed chairs, four of whom rotate on an annual basis. At recent FOMC meetings, including Wednesday’s, Fed chairs have been more reluctant to cut rates, while Trump-appointed governors have been more aggressive in their calls for cuts.
Deutsche Bank strategist Jim Reid noted in a note Friday that the 10-year Treasury yield rose slightly after the Fed’s mandate renewal announcement as bond investors anticipated fewer rate cuts.
“The current terms of the regional chairs expire in February, so the early announcement suggests that the Board was united in avoiding the risk that the reappointment process would raise questions about the independence of the Fed,” he added.
Justin Wolfers, a professor of public policy and economics at the University of Michigan, was more blunt about the Fed’s surprise news.
“As I understand it, they simply put the Fed to the test of Trump,” he wrote in an article on X.
What’s also notable about this reappointment is the unanimous decision to bring back the Fed chairs, suggesting that the Trump-appointed governors also agreed to it.
That includes Stephen Miran, who is on leave as chairman of the White House Council of Economic Advisers to fill a vacancy at the Fed.
Before joining the administration, he had advocated an overhaul of the Federal Reserve to give the U.S. president the power to fire Fed board members and Fed bank presidents at will; hand control of the Fed’s operating budget to Congress; and shift responsibility for regulating banks and financial markets from the Fed to the Treasury.
The changes would diminish the Fed’s power in favor of the White House, as JPMorgan analysts warned earlier this year. Miran’s nomination “fuels an existential threat as the administration appears likely to target the Federal Reserve Act to permanently alter U.S. monetary and regulatory authority.”
