The Federal Reserve could start resembling the Supreme Court

Since returning to the White House, he has demanded that the Fed cut rates and routinely insults Chairman Jerome Powell for not doing so. After teasing that he could fire Powell then backing off, Trump has threatened to fire Fed Governor Lisa Cook if she doesn’t resign.

For her part, Cook said she won’t be bullied into stepping down and plans to rebut accusations of mortgage fraud from a Trump administration housing official. That’s raised the question of how long she might choose to serve.

Cook joined the Fed in 2022 after being tapped by President Joe Biden to fill an unexpired term that ended in 2024, then getting reappointed. So she can stay on the Fed board until 2038, though governors typically don’t serve out their entire 14-year terms.

“However, the Fed has increasingly become a political football,” Ian Katz, managing partner at Capital Alpha Partners, said in a note Wednesday. “Trump has been clear that he wants to put loyalists on the board. As a result, some governors may choose to remain on the board until a president from their same political party is in the White House — making the Fed in that way more like the Supreme Court.”

Meanwhile, Trump has named Stephen Miran, chair of the White House’s Council of Economic Advisers, to fill a vacancy on the board left by Adriana Kugler, who stepped down before her term was due to expire in January.

He has backed Trump’s call for lower rates. More notably, Miran also cowrote a paper in 2024 calling for an overhaul of the Fed that reduces its independence.

That could factor into Cook’s decision on how long she will stay. In his note, Katz observed that “governors in the past have stepped down without concern that the president would nominate a replacement who isn’t a strong believer in Fed independence.”

Similarly, Powell’s own plans have come under scrutiny. While his term as board chair expires in May, his term as a governor extends to January 2028. 

Treasury Secretary Scott Bessent has said Powell should step down as governor when his term as chairman ends, saying that has been the tradition. Powell has declined to say what he will do.

The stakes could go well beyond how much the Fed lowers rates. Analysts at JPMorgan have even warned that Miran’s appointment represents an “existential threat” to the Fed as it signals an intention to amend the Federal Reserve Act and alter the central bank’s authority.

Split decisions

It’s not clear if Miran will be reappointed to the Fed board as the White House looks for someone to replace Powell as chairman. But either way, the Fed will have three Trump-appointed governors.

To be sure, that’s not enough to sway rate decisions on the 12-member Federal Open Market Committee, which is also comprised of regional Fed presidents. But if Trump is able to name a fourth governor, that’s enough to tip the balance on the seven-member board.

As Axios recently pointed out, a board majority would give Trump appointees power over the Fed’s budgets, staffing, and even selection of regional Fed presidents. Those presidents are appointed by directors of the regional Fed banks, but they are subject to the approval of the board. And in February, the five-year terms for all the bank presidents are scheduled to expire.

With composition of the Fed in flux, a more divided era may be looming that also resembles the Supreme Court.

Fed rate decisions are usually unanimous with even one dissenting vote being rare. By contrast, the high court rarely has unanimous votes, while split decisions along ideological lines are common.

July’s Fed meeting may have been a preview of what’s to come as two Trump-appointed governors voted to lower rates, going against the majority that kept rates steady.

And although Powell opened the door to a rate cut at the September meeting, that doesn’t guarantee a consensus either as other FOMC members still sounded hawkish, such as Kansas City Fed President Jeffrey Schmid.

That sets up another FOMC meeting with dissenting votes. In addition, the pace of any subsequent cuts isn’t clear, providing more fodder for debate at the central bank as Trump-appointed officials push for dovish policy.

Like the chief justice of the Supreme Court, the Fed chair represents just one vote but is also a first among equals who carried outsized influence. So whoever replaces Powell may need to rely on their powers of persuasion on a Fed with more conflicting views.