Trump’s assault on the Fed has reached boiling point

3 hours ago 3

Opinion

September 15, 2025 — 11.57am

Donald Trump’s attempt to stack the board of the US Federal Reserve is climaxing, just ahead of a Fed meeting at which the US central bank is expected to cut its policy rate for the first time this year.

Senate Republicans were scrambling last week to confirm the appointment of Trump’s key economic adviser, Stephen Miran, to fill a vacancy on the board.

US President Donald Trump is looking to tighten his grip on the Fed.

They hope to complete the process by Monday evening (US time), before the Federal Open Market Committee (FOMC), which decides US monetary policy, starts its two-day meeting on Tuesday.

On Thursday last week, the Trump administration asked a US appeals court to overturn a lower court decision and allow Trump to sack a sitting Fed governor, Lisa Cook, urging the court to make its decision before the close of business on Monday, again just ahead of the FOMC meeting.

There are 12 voting members of the FOMC, including two Trump appointees – Christopher Waller and Michelle Bowman – so an appointment of Miran and removal of Cook would give Trump three of the 11 people who will decide whether to cut the federal funds rate and whether that rate cut should be 25 basis points or 50 basis points.

Longer term, if Trump were successful in removing Cook and replacing her with his own nominee, four of the seven-member Fed board of governors would owe him their position. In May, when Jerome Powell’s term as chair (but not as a governor) expires, he could elevate one of his appointees to that powerful position.

It should be said that, regardless of what happens to Miran and Cook, the Fed is poised to cut the federal funds rate (analogous to the Reserve Bank’s cash rate) because the US jobs market has stalled and the unemployment rate is rising.

It’s likely to be only a 25 basis point cut because, even as the jobs market and economy weaken, the US inflation rate is also continuing to edge up as the impact of Trump’s tariffs gradually starts to show up in the data. Last month, the US consumer price index rose by 0.4 per cent.

The Miran appointment, while certain to be rubber-stamped by the Republican majority in the Senate, is controversial because he has said he won’t resign from his role as chair of Trump’s Council of Economic Advisers, instead taking an unpaid leave of absence.

Miran was nominated to fill the remaining term of former governor Adriana Kugler, who resigned last month, even though her term wasn’t scheduled to end until January 31 next year. It is unclear if he will remain on the board beyond that date.

Trump is still trying to fire Cook on the basis of an allegation made on social media that hasn’t been proven and now appears to have been disproved.

By remaining a key Trump adviser while serving as a governor, Miran, regarded as the architect of the administration’s more contentious economic policies – including the tariffs and Trump’s efforts to bring the Fed under the administration’s control – would not be independent in an institution that Congress designed to be separated from politics.

Unlike Waller or Bowman, appointed by Trump but not part of the administration (although Waller is on the short list to be the next Fed chair and therefore wouldn’t want to be offside with Trump), he’d clearly be Trump’s main man inside the Fed.

The Cook affair is also tainted. Trump purported to fire her last month, via a social media post, after the head of the Federal Housing Finance Agency, Bill Pulte, alleged (in a social media post, of course) that she had named two separate properties as her principal place of residence in loan documents, which may have enabled her to borrow more cheaply.

Cook has not been charged with anything and can only be sacked “for cause”, which is generally thought to mean that the official has done something seriously wrong while in office.

The initial judgment that the administration is appealing was that Trump’s justification to fire Cook didn’t meet the threshold for sufficient cause, in part because the alleged actions occurred before she was a governor.

As it happens, what Pulte and Trump have alleged may not even have occurred.

Reuters and then a string of other major media outlets have said Cook described her second property as “a vacation home”, not her principal place of residence, in loan documents they have seen. Cook’s lawyers said any errors in the loan documents, if there were errors, were unintentional and might be the result of clerical errors.

If the documents Reuters and others have sighted – which appear to be loan estimates provided by a credit union – exist, then, regardless of what the final loan documents showed, the lender would have been aware that the loan was for a holiday home, not as her primary residence.

In other words, Trump is still trying to fire Cook on the basis of an allegation made on social media that hasn’t been proven and now appears to have been disproved. The allegations are a pretext to try to open another spot on the Fed board for a Trump appointee.

If Trump can gain a majority of the seven-person board, he would then be in a position to remake the FOMC, for which the remaining members are the president of the New York Fed and the presidents of four of the Fed’s 12 regional banks, who serve on a rotating basis. The Fed’s board can veto those appointments.

The White House, with a president who has said he wants the federal funds rate cut by three percentage points, would be able to dictate US monetary policy, ending three-quarters of a century of the US central bank’s independence.

When the Fed last met in July, for the first time in more than 30 years, two governors – Waller and Bowman – dissented from the majority’s decision to hold rates steady. The interest this week will be in whether Miran, Waller and Bowman argue for something more than the 25 basis points cut expected.

The majority is likely to be conservative – there could be some who argue for rates to remain on hold – because, while the jobs market appears to be shrinking and the unemployment rate is rising, the full effects of Trump’s tariffs are yet to show up in the data.

That’s because of the on-off-on way they were implemented, which allowed companies to build up inventories of goods before the tariffs took effect. With the main “reciprocal” tariffs finally going live last month, their impact on prices will progressively show up over the rest of this year and beyond.

The worst-case outlook for the Fed is one of stagflation: low economic growth, or even a recession, while the inflation rate remains high. Trump’s trade wars and his immigration policies make it possible that there could be, simultaneously, rising unemployment and rising inflation.

If the Fed acts independently as it has throughout this year, it will move cautiously, testing the economic environment with a modest rate cut and then waiting for fresh data before it decides its next move.

The extent to which Trump’s transparent assault on its independence has created a political context for this week’s rates decision and a need for the board to reassert that independence is another motivation for the Fed to make it clear that Trump’s coercion hasn’t compromised its decision-making.

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