The Federal Reserve will have two vacancies, and Trump is expected to nominate dovish members to promote aggressive rate cuts

According to the Zhitong Finance APP, U.S. President Donald Trump has recently pressured the Federal Reserve again, publicly expressing his hope that the bank will significantly cut interest rates by 3 percentage points, returning to the ultra-low interest rate levels seen during the COVID-19 pandemic. This proposal far exceeds current market expectations and contradicts the current economic fundamentals in the U.S. However, with two important positions at the Federal Reserve soon to become vacant, Trump may indeed have the opportunity to reshape the central bank's leadership, thereby promoting the aggressive easing policies he desires. The term of Federal Reserve Governor Adriana Kugler will expire in January 2026, while the current Chairman Jerome Powell's term will end in May 2026. Traditionally, the Federal Reserve Chairman usually completely resigns from the board after their term ends. This means that if Trump wins the 2024 election and successfully nominates two successors, he will have the opportunity to decide on four of the seven governors, forming a "de facto majority," and nominate a Federal Reserve Chairman who is more inclined towards significant interest rate cuts. Despite cooling inflation and slowing job growth, the Federal Reserve still maintains the benchmark interest rate in the range of 4.25% to 4.50%. Powell has repeatedly emphasized that it will take time to observe the comprehensive impact of tariff policies and fiscal measures on the economy. He pointed out that the inflation data to be released in July is crucial, and this report will be published after the interest rate meeting in late July, making a rate cut in July unlikely. However, some governors nominated during Trump's administration have begun to pave the way for easing policies. Current Governor Christopher Waller recently stated that the actual weakness of the U.S. labor market is masked by surface data, and inflation risks are dissipating. He even hinted that if there is no rate cut at this month's meeting, he might dissent. Another governor nominated by Trump, Vice Chair for Supervision Michelle Bowman, has also recently shifted to a dovish stance. Will Denyer, an economist from Gavekal Research, pointed out that the timing of these personnel dynamics is extremely critical. He believes that Waller has now become a leading candidate to succeed Powell as chairman in 2026. Unlike other potential nominees, Waller has been confirmed by the Senate and enjoys widespread respect within the Federal Reserve system. Nevertheless, Trump's demand for a 3 percentage point rate cut is still widely regarded as unrealistic, even dangerous. The current U.S. economy is still in a phase of moderate growth, inflation remains above the Federal Reserve's 2% target, and the uncertainty of tariff policies casts a shadow over the outlook. Trump, however, insists that ultra-low interest rates will significantly reduce the federal government's debt financing costs. He claimed on social media: "Ultra-low inflation can save a trillion dollars every year!" In contrast, market expectations are clearly more conservative. According to interest rate futures pricing, investors generally expect the Federal Reserve may cut rates twice by the end of the year, each by 25 basis points, which aligns with the Federal Reserve's own dot plot forecast. Economists at Citibank expect that if future labor market data continues to weaken, the likelihood of a rate cut starting in September is increasing. But this is still quite distant from the "deep easing" that Trump hopes for. Nobel laureate Paul Krugman warned that Trump's intervention in monetary policy is reminiscent of Turkish President Erdogan, who pushed the central bank for significant rate cuts, ultimately leading to a vicious cycle of hyperinflation and emergency rate hikes