President Trump says he will announce his nominee for Federal Reserve chair Friday morning, as he puts pressure on the Fed to cut interest rates.
“I’ve chosen a very good person to head the Fed,” he told reporters late Thursday. In response to a question from CBS News senior White House reporter Jennifer Jacobs, the president described his pick as an “outstanding person” who is “very respected” and “known to everybody in the financial world.”
The president hasn’t said who he will nominate for the influential economic policy role. He’s indicated in recent weeks that the two front-runners are White House National Economic Council Director Kevin Hassett and former Fed board member Kevin Warsh, telling Reuters earlier this month, “the two Kevins are very good.” He suggested to the news service that other candidates could be in the mix, too.
But Mr. Trump has made clear what he’s looking for in the next Fed chair: a willingness to reduce interest rates at a faster clip.
The president has lashed out at current Federal Reserve Chair Jerome Powell over the Fed’s slow-and-steady approach to interest rate cuts over the last year. Lower rates could lead to hotter economic growth and cheaper borrowing costs for consumers and businesses, but at the risk of causing inflation to resurge.
In recent months, Mr. Trump has called Powell a “stubborn mule” and “Mr. Too Late,” and has mused about firing Powell, whom Mr. Trump initially appointed Fed chair in his first term. Powell’s term as Fed chair ends in May, but he can remain a rank-and-file member of the Fed’s Board of Governors until early 2028 — though most outgoing Fed chairs step down from the central bank altogether.
The pressure on Powell ramped up earlier this month, after Powell announced that the Fed was served subpoenas from the Justice Department over a criminal investigation into Powell. The probe focused on Powell’s testimony before the Senate Banking Committee concerning a pricey project to renovate the Fed’s D.C. headquarters.
Powell cast the subpoenas as an effort to intimidate the Fed and undermine its independence.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the president,” Powell said.
The White House says Mr. Trump didn’t direct the Justice Department to issue subpoenas, and U.S. Attorney for D.C. Jeanine Pirro has insisted the subpoenas were “not a threat,” but were instead issued because the Fed wasn’t answering questions.
In an interview with CBS News earlier this month, Mr. Trump brushed off allegations of political retribution, saying: “I can’t help what it looks like.”
The subpoenas could make it more difficult for the Senate to confirm a new Fed chair. Several Senate Republicans sharply criticized the investigation, including Sen. Thom Tillis of North Carolina, who sits on the Senate Banking Committee and said he will oppose any new Fed nominees “until this legal matter is fully resolved.”
If the Senate confirms Mr. Trump’s nominee for Fed chair, it would significantly increase his influence over the central bank, whose monetary policy decisions have sweeping impacts on the global economy. Currently, just three of the Fed’s seven board members were initially put on the board by Mr. Trump.
Still, the Fed chair’s power is not unlimited. Interest rates are technically set by a 12-member committee that includes the seven board members and five representatives from the Fed’s regional banks, and while the chair usually has a great deal of influence over the panel, he just gets one vote.
It’s also possible that Powell could stay on the Fed board after his time as chair ends.
In that case, Mr. Trump’s nominee for chair would likely need to replace current Fed board member Stephen Miran, a White House adviser who was confirmed to a short-term posting on the Fed last year, leaving Mr. Trump with just three out of seven board seats. The next opening on the board — whose members serve 14-year terms — would arise when Powell’s term ends in January 2028.
And there’s no guarantee that a Trump-appointed Fed chair will vote in line with the president’s wishes. After all, Powell was originally chosen as chair by Mr. Trump.
The Trump administration is currently fighting in court for the ability to remove Biden-nominated board member Lisa Cook, which would open up another seat. The president attempted to fire Cook last year on allegations that she made false statements on mortgage documents, but she sued, citing a federal law that specifies Fed board members can only be fired “for cause.”
Courts have allowed Cook to stay in her job while her lawsuit progresses. The Supreme Court has taken up the case and is expected to rule at some point this year. In oral arguments last week, the justices appeared likely to let her keep her job.
