(AFP) – The US Federal Reserve started a key interest rate meeting Tuesday, hours after Donald Trump’s new appointee narrowly won confirmation to join the central bank — while another top official fights her removal by the president. Stephen Miran, the chair of Trump’s Council of Economic Advisers, took the oath of office as a Fed governor early Tuesday, the bank said, as its rate-setting Federal Open Market Committee (FOMC) began a two-day policy gathering. Miran narrowly won a Senate vote on Monday night, making him one of the FOMC’s 12 voting members. Economists expect he will not radically shift this week’s outcome.
There is little doubt that the Fed will make its first interest rate cut of 2025 after the latest gathering, as policymakers pivot towards shoring up a deteriorating jobs market. But concerns about political influence targeting the independent central bank will loom over the gathering, as Trump repeatedly bashes Fed Chair Jerome Powell over his rate decisions, and after he moved to fire governor Lisa Cook, sparking a legal battle. On Tuesday, Trump told reporters that the Fed should “listen to smart people like me.”
The last-minute addition of Miran is unlikely to drastically alter the meeting’s result, said Oxford Economics’ chief US economist Ryan Sweet. Sweet also cast doubt on whether Miran would have joined in time to submit an economic projection and path for monetary policy. Miran has come under fire from Democratic lawmakers over his plan to take only a leave of absence from his White House role, rather than resign. He is serving out a Fed term which expires in just over four months, filling governor Adriana Kugler’s term after she stepped down.
– Court appeal – Trump has separately sought to oust Fed Governor Cook, claiming that mortgage fraud allegations are sufficient “cause” for her removal. So far, Cook, who was appointed by former president Joe Biden, has managed to remain in place for the FOMC meeting. Trump announced in August that he was removing her, and she has been in a legal battle with the president since — a fight that could have broader implications for the Fed moving forward. While a federal appeals court ruled late Monday that she could remain in position while her legal challenge proceeds, the Trump administration is likely to take the case to the Supreme Court.
“The administration will appeal this decision and looks forward to ultimate victory on the issue,” White House spokesman Kush Desai told AFP. Although Trump pointed to a criminal referral in announcing Cook’s removal, she has not been charged with a crime and the alleged incidents took place before she was a Fed governor. Since its last cut in December, the Fed has held the benchmark lending rate at a range between 4.25 percent and 4.50 percent as policymakers monitor the effects of Trump’s tariffs on the economy. But markets widely expect a 25 basis points cut at the end of discussions on Wednesday. Investors will also be watching for signals on the number and pace of future rate reductions.
Nationwide chief economist Kathy Bostjancic does not anticipate a strong consensus to cut rates by a bolder 50 basis points. But Fed governors Christopher Waller and Michelle Bowman, who voted against the FOMC’s last decision to hold rates steady — instead favoring a rate cut — could now dissent in favor of a larger reduction. They could also be joined by Miran this time, Bostjancic said.
– Beiyi SEOW
© 2024 AFP
