Trump makes surprise decision on Federal Reserve

He’s pro-tariffs, pro-crypto and, most importantly, pro-Trump.

Still his nomination to fill the temporary open seat on the Federal Reserve was unexpected.

💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter💰💵

But the message from President Donald Trump is clear: he wants to influence the way the independent central bank sets monetary policy via benchmark interest rates.

Trump taps top economic advisor for Fed spot

Trump nominated Stephen Miran, the chair of the Council of Economic Advisors and a Harvard Ph.D, on Aug. 7 to serve as temporary Fed governor, filling the opening left by Adriana Kugler’s unexpected resignation.

Kugler, a labor economist, announced that her surprise resignation would take effect Aug. 8.

The Biden appointee is returning to her academic role as a professor of public policy at Georgetown University’s McCourt School of Public Policy.

She did not give a reason for her early resignation, which Trump called a “pleasant surprise.”

It allows him the opportunity to appoint two of the seven members of the Fed board once Jerome Powell’s term as chair expires in May 2026.

Trump has been extremely critical of Powell and the other 11 members of the Federal Open Market Committee for a “wait and see” approach to monetary policy and holding interest rates steady despite weakening jobs numbers and the potential of tariff inflation.

How the Fed uses interest rate cuts

The Federal Reserve’s dual mandate from Congress is to balance low unemployment and low inflation using interest rates as the benchmark tool.

That’s tricky.

Higher interest rates lower inflation but increase job losses.

Lower interest rates decrease unemployment but increase inflation.

Trump’s attacks on Powell have escalated since the FOMC voted in July to hold the benchmark Federal Funds Rate steady at 4.25% to 4.50%.

The last rate cut was in December 2024. Trump wants a 3% cut.

Fed Governor Christopher Waller and Fed Governor Michelle Bowman, Trump appointees like Powell, dissented from the FOMC July vote.

Waller and Bowman both said it was time for a .25% cut due to softness on the jobs front.

Waller is believed to be the top candidate to replace Powell, Bloomberg reported Aug. 7.

Miran’s nomination heads for the Senate

Miran has echoed Trump’s vocal and heated criticism of Powell.

The president said Miran will fill the Kugler role in a temporary capacity until Jan. 31 and that the search for a permanent candidate will continue for that 14-year term.

Sen. Tim Cotton, the chair of the Senate Banking Committee, welcomed Miran’s nomination, calling him an “accomplished economist.”

The South Carolina Republican pledged to fast track Miran’s name through the confirmation process.

It is not clear if Miran will be approved by the time of the Sept. 17 FOMC meeting.

There’s a 92.7% chance of a .25% rate cut then, according to the CME Group FedWatch Tool.

More Federal Reserve:

Miran wrote the administration’s shock-and-awe tariff policy which went into effect Aug. 7 and shook the U.S. global trading partners when it was announced on April 2, also known as Liberation Day.

The president has boasted that the new revenues from the tariffs — the highest in over 90 years — will pour billions of dollars into the Treasury.

Miran served as an economist in the Treasury Department during the first Trump administration.

He is the author of a November 2024 paper dubbed the “Mar-a-Lago Accord” which outlined a new approach to managing the role of the dollar in the global financial system.

Prior to his role in Trump 1.0, Miran worked for the hedge fund Hudson Bay Capital Management and was a fellow at the Manhattan Institute.

Massachusetts Sen. Elizabeth Warren, the ranking member of the Senate Banking Committee called Miran a “Trump loyalist,’’ adding she would have “tough questions for him during his confirmation hearing about whether he’d serve the American people as an independent voice at the Fed or merely serve Donald Trump.”