Federal Reserve Governor Christopher Waller resigns, Trump is expected to intervene in interest rate decisions early, and may plan for Powell's successor

The Federal Reserve announced on Friday that Governor Adriana Kugler will resign from her position on the Federal Reserve Board, effective August 8. She has submitted her resignation to President Trump. In a letter to Trump, the 55-year-old Kugler did not specify the reason for her resignation, only stating that she will return to Georgetown University as a professor in the fall. She did not attend this week's Federal Open Market Committee (FOMC) meeting, with officials citing personal matters for her absence. In a statement released by the Federal Reserve, Kugler said, "It has been the honor of my life to serve on the Federal Reserve Board, especially during this critical time as we strive to achieve the dual mission of lowering prices while maintaining a strong and resilient labor market." The Federal Reserve Board has a total of seven seats, all of which are permanent voting members of the FOMC; an additional five FOMC seats are held by the presidents of the regional Federal Reserve Banks on a rotating basis. All governors are nominated by the president and confirmed by the Senate, serving a term of 14 years; regional Federal Reserve Bank presidents are elected by their respective regional banks. Kugler's term as a governor was originally set to expire in January 2026. She previously served as the Chief Economist at the U.S. Department of Labor and was nominated by Biden, joining the Federal Reserve Board in September 2023 to fill the term left by Lael Brainard, who transitioned to become Biden's economic advisor. As a governor, Kugler was a permanent voting member of the FOMC, participating in decisions regarding interest rate policy. Recently, Kugler held a relatively hawkish stance, advocating for maintaining interest rates until the impact of Trump's tariffs on inflation becomes clearer. Federal Reserve Chairman Powell wished Kugler all the best, stating: "She brought exceptional experience and academic insight to the Board's work." Trump Will Have the Opportunity to Place His People Kugler's resignation comes at a time when President Trump and his allies are continuing to pressure the Federal Reserve to cut interest rates, which the Fed has refused to do this year. Meanwhile, the Trump administration is accelerating its search for a successor to Powell, whose term will end in May 2026. Trump has repeatedly called for the Fed to cut rates by 3 percentage points and stated on social media on Friday that the Federal Reserve Board should "take control," and if Powell refuses to cut rates, "the Board should do what everyone knows needs to be done." According to media reports, some of Trump's allies recently suggested arranging for a "shadow chairman" to enter the Board before Powell's term ends next May, preparing for a future leadership transition at the Federal Reserve. Kugler's departure makes this strategy possible five months earlier. U.S. Treasury Secretary Scott Bessent has also indicated that the government may first nominate someone to fill Kugler's vacancy before considering that person for the next Federal Reserve chair. Additionally, the White House hopes that Powell will also resign from his governor position at that time, providing Trump with another appointment opportunity. However, Powell has not indicated whether he intends to resign early before 2026, as his term as governor extends to 2028. Currently, potential candidates for the Federal Reserve chair include National Economic Council Director Kevin Hassett, former Federal Reserve Governor Kevin Warsh, Treasury Secretary Scott Bessent, and current Federal Reserve Governor Christopher Waller Analysis suggests that Kugler's resignation paves the way for Trump to nominate his own candidates to the Federal Reserve Board, potentially allowing Trump to exert greater influence on interest rate policy in the coming months through the newly nominated board members. "Insiders" have begun to take action, Trump: dissenting voices will be stronger The two board members appointed by Trump—Waller and Michelle Bowman—voted against the decision to maintain interest rates at the meeting on Wednesday, expressing a desire for rate cuts. This marks the first time since 1993 that Federal Reserve board members have publicly opposed an interest rate decision. On Friday, they explained why they cast their dissenting votes. Both expressed concerns about the labor market outlook and argued that policy should be loosened sooner. Waller stated: "A wait-and-see approach is too cautious and fails to properly weigh the risks, which could lead to a lag in policy response." About 30 minutes after these statements were released, the U.S. July non-farm payroll report was released, showing that the number of new jobs was below expectations. Following the report, market expectations for a rate cut in September surged from less than 40% on Thursday to 80%. Trump then posted again on Truth Social, praising the "strong opposition" of the Federal Reserve board members to inaction, stating: "The dissenting voices on the Federal Reserve Board are strong and will become even stronger."