Intense political maneuvering before the Federal Reserve's September meeting: Trump's "trusted aide" successfully takes office, but the effort to remove Governor Cook fails

According to the Zhitong Finance APP, the efforts of the Trump administration to influence Federal Reserve decisions have led to a fierce game of tug-of-war with the independence of the central bank. The U.S. Senate narrowly approved Trump's economic advisor Stephen Miran to join the Federal Reserve Board, strengthening Trump's influence over monetary policy. Miran supports interest rate cuts and is expected to advocate for more significant easing at the September meeting. Meanwhile, the D.C. Circuit Court of Appeals rejected Trump's request to dismiss Federal Reserve Board member Lisa Cook, upholding the independence of the Federal Reserve. The court ruled that the president does not have the authority to dismiss a board member based on their policy positions.

Trump's Economic Advisor Approved by Senate to Join the Federal Reserve

On Monday, the U.S. Senate narrowly approved Stephen Miran to join the Federal Reserve Board with a vote of 48 to 47, thereby expanding Trump's influence over the Federal Reserve and granting Miran one of the 12 voting rights on interest rate decisions at key policy meetings.

The Senate's approval marks the final step in a process that began in August when Adriana Kugler unexpectedly resigned from the Federal Reserve Board. This provided Trump with the opportunity to "occupy" the Federal Reserve Board with a candidate more inclined to lower interest rates, as the president has been calling for this since the beginning of the year.

Typically, nominations for Federal Reserve Board members require months of Senate review before being approved; however, Miran's case was completed in less than six weeks. Senator Lisa Murkowski from Alaska was the only Republican to oppose Miran's nomination.

Miran is expected to participate in the two-day Federal Reserve meeting starting on September 16. The market widely anticipates that the meeting will announce a 25 basis point interest rate cut, but analysts believe Miran may advocate for a more significant cut. As the chairman of the White House Council of Economic Advisers, he has repeatedly emphasized that Trump's high tariff policies will not drive up inflation and believes that tightening immigration will alleviate housing demand, thereby easing price pressures.

As the newest member of the Federal Reserve, Miran's responsibilities will not be limited to voting on interest rates; board members typically participate in various committee tasks, including U.S. financial regulation and oversight, community banking, personnel and budget decisions for the U.S. central banking system, and decision-making for its 12 regional banks.

Miran will continue to hold his White House position but will be on unpaid leave during his term at the Federal Reserve (ending on January 31), although he can remain indefinitely if his successor for the Federal Reserve seat has not yet been selected and confirmed.

Democrats have called this arrangement a way to make him Trump's "puppet," but Miran has denied this.

The other two Federal Reserve Board members appointed by Trump during his first term—Michelle Bowman and Christopher Waller—held differing opinions at the meeting on July 29-30, supporting looser policies. Analysts have indicated that labor market data released since then has fallen short of expectations, which may prompt them to hold differing opinions again in September, leaning towards advocating for further significant interest rate cuts (i.e., exceeding the widely expected 25 basis points) Since 1988 (the early term of former Federal Reserve Chairman Alan Greenspan), there has not been a situation where three Federal Reserve governors held differing opinions simultaneously.

Trump's Attempt to Dismiss Federal Reserve Governor Denied

Meanwhile, on Monday, a U.S. appeals court rejected Trump's request to dismiss Federal Reserve Governor Lisa Cook—this is the first time a president has taken such action since the Federal Reserve was established in 1913—marking the latest step in a legal battle that threatens the long-standing independence of the Federal Reserve.

The decision by the U.S. Court of Appeals for the District of Columbia means that if the Trump administration wishes to prevent Cook from attending the Federal Reserve policy meetings on Tuesday and Wednesday, they have only a few hours to appeal to the U.S. Supreme Court. The U.S. Court of Appeals for the District of Columbia denied the Justice Department's request to temporarily stay a judge's order aimed at preventing Trump from removing Cook, who was appointed by Democratic former President Joe Biden.

U.S. District Judge Jia Cobb ruled on September 9 that Trump's claim that Cook committed mortgage fraud before taking office (which Cook denies) may not constitute sufficient grounds for her removal under the law that established the Federal Reserve.

When establishing the Federal Reserve, Congress included provisions to protect the central bank from political interference. According to the law that created the Federal Reserve, governors can only be removed by the president for "cause," but the law does not define what "cause" means or establish a removal procedure. To date, no president has ever removed a Federal Reserve governor, and the law has never been tested in court.

In Monday's ruling, Garcia wrote that Cook's due process claim "is very likely to be valid," and therefore the court need not explore the meaning of "for cause" at this time.

Cook is the first Black woman to serve as a Federal Reserve governor, and she sued Trump in late August. Cook has stated that these allegations do not grant Trump the legal authority to dismiss her but are merely an excuse to remove her based on her monetary policy stance.

The Trump administration argues that the president has the authority to decide when to dismiss members of the Federal Reserve and that the courts have no jurisdiction to review such decisions. This incident affects the Federal Reserve's ability to set interest rates without regard to the wishes of politicians, a practice that is seen as crucial for any central bank to independently carry out tasks such as controlling inflation.

This year, the Supreme Court allowed Trump to dismiss various appointed officials in federal agencies, who were previously established under congressional provisions and are independent of direct presidential control.

However, in a May ruling involving Trump's dismissal of two Democratic members of the Federal Labor Relations Authority, the Supreme Court stated that it views the Federal Reserve as distinct from other executive branch agencies. The report noted that the Federal Reserve is a "structurally unique, semi-private entity" with a unique historical tradition The judge wrote in a ruling on Monday that, unlike other regulatory committee members whom the Supreme Court allowed Trump to dismiss, Cook was not permitted to be fired at any time, which makes her case unique.

In blocking Cook's removal, the judge found that the "best interpretation" of the 1913 law is that it only allows for the dismissal of Federal Reserve officials for misconduct while they are in office. The mortgage fraud allegations against Cook are all related to actions she took before her appointment by the U.S. Senate in 2022.

Cook's lawyers stated in response documents that firing Cook before the meeting would affect both U.S. and foreign markets, and that allowing Cook to remain in her position serves the public interest, outweighing Trump's attempts to control the Federal Reserve