The Federal Reserve’s early reappointment of regional bank presidents surprised markets and eased concerns that the central bank will soon lose its independence as President Donald Trump continues to demand steep interest rate cuts.
Thursday, Fed announces 11 of 12 bank presidents Except for Atlanta Fed President Raphael Bostic, who previously announced his resignation, everyone else’s status has been improved.
The president’s five-year term ends in February, and previous re-elections have typically been closer to their expiration dates because they have historically been routine. But recent suggestions by the Trump administration that new conditions should be imposed on the president have raised concerns that the administration is seeking a broader leadership shake-up.
Earlier this month, Treasury Secretary Scott Bessant introduced a three-year residency requirement for the Fed chair. Days later, National Economic Council Director Kevin Hassett, the frontrunner to be the next Fed chair, endorsed the idea.
While Fed chairs are nominated by governing councils from their respective regions, their approval is granted by the Board of Governors. As a result, the balance of power among Trump-appointed Fed board members, who also have the ability to reshape the Fed chairman, could be tipped.
Meanwhile, the rate-setting Federal Open Market Committee consists of the seven members of the Fed’s Board of Governors and five of the twelve Fed chairmen, four of whom rotate annually. In recent FOMC meetings, including Wednesday’s meeting, the Fed chair has been more resistant to rate cuts, while Trump-appointed governors have been more aggressive in calling for rate cuts.
Deutsche Bank Strategist Jim Reid said in a note on Friday that the 10-year Treasury yield edged higher after the Federal Reserve’s re-election announcement as bond investors anticipated fewer rate cuts.
He added: “The regional presidents’ current terms are set to expire in February, so the early announcement demonstrates the board’s unanimous desire to avoid the reappointment process raising questions about the Fed’s independence.”
Justin Wolfers, a professor of public policy and economics at the University of Michigan, was more blunt about the Fed’s unexpected news.
“If I’m not mistaken, they are simply providing evidence to the Fed,” he wrote in a post. Post on X.
Also notable for this re-election was the unanimous decision to re-elect the Fed chair, suggesting that Trump-appointed governors also agreed with the decision.
Among them is Stephen Miran, who is taking a leave of absence while filling the Fed’s vacancy as chairman of the White House Council of Economic Advisers.
Before joining the government, he urged Fed reform Gives the President the power to fire Federal Reserve Board members and Fed bank presidents at will; transfers control of the Fed’s operating budget to Congress; and transfers the Fed’s regulatory responsibility for banks and financial markets to the Treasury Department.
These changes will weaken the Fed’s support for the White House, so many analysts believe JPMorgan issued a warning earlier this year Millan’s appointment “elevates the existential threat as the administration could target the Federal Reserve Act to permanently alter the U.S.’s monetary and regulatory institutions.”