:max_bytes(150000):strip_icc()/GettyImages-2225624346-913bad8519e14be195f5ba80216f57f8.jpg "We Still Don’t Know Who At The Fed Will Vote On Interest Rates Next Week")
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Key Takeaways
- Less than a week before the Fed’s policy committee is set to vote on interest rates, the makeup of the 12-person body is undecided.
- Key questions are whether Fed Governor Lisa Cook will remain on the committee despite President Donald Trump’s attempts to fire her, and whether the Senate will confirm a Trump nominee to join the FOMC.
- Wednesday’s meeting will mark a pivotal moment in President Donald Trump’s efforts to influence the Fed and get the central bank to cut interest rates.
The Federal Open Market Committee is set to vote on whether to lower the Federal Reserve’s key interest rate next Tuesday, but it’s not yet clear who exactly will be on the committee.
The biggest question concerns Fed Governor Lisa Cook, whom President Donald Trump fired last month, citing allegations of mortgage fraud—the first time a president has attempted to fire a leader of the independent central bank. Cook sued the Trump administration to prevent her dismissal. On Tuesday, a court sided with her, agreeing that the president likely exceeded his authority. The judge ordered that she be allowed to continue her job while the case plays out. The Trump administration appealed the order.
In addition, Trump is trying to fill the temporary vacancy on the Fed’s board of governors created when Adriana Kugler abruptly resigned last month. On Wednesday, a Senate panel voted to advance his nomination of Stephen Miran, a White House economic advisor, to replace her. The full Senate could vote as early as Monday, clearing the path for Miran to vote at the Fed’s meeting next Tuesday and Wednesday, Politico reported.
Pressure For a Rate Cut
At stake is control of the 12-person committee that votes to set the fed funds rate, which dictates the interest rates at which banks lend money to one another.
The fed funds rate affects borrowing costs for all kinds of loans, including credit cards and car loans. Trump has repeatedly demanded the central bank lower interest rates and has at times threatened to fire Fed Chair Jerome Powell. Trump has argued that high interest rates are holding back the economy and costing the government billions in interest payments on the national debt.
Trump’s pressure on the Fed, his firing of Cook, and his appointment of Miran have raised concerns among economists that the Fed will at some point lower interest rates because it’s what the president wants, not because it will benefit the economy. That’s stoked a growing concern that the Fed may not remain independent from the White House.
Economists who defend the central bank’s independence point out that countries with less independent central banks, like Turkey, tend to have higher inflation. After Turkey’s authoritarian president, Recep Tayyip Erdoğan, pressured its central bank to lower rates in 2022, rates soared to 85%.
The Fed is widely expected to cut interest rates by a quarter-point at the meeting, regardless of who is on the committee. A slowdown in the job market has added pressure on the Fed to cut rates to boost the job market and prevent a surge in unemployment.
Still, that’s far short of the steeper cuts Trump has called for. Future interest rate decisions could be more controversial, and every vote could count, as the Fed’s dual mandate to control inflation and keep employment high could pull it in different directions.
