Powell shows possible Fed rate reductions in September
Federal Reserve Chairman Jerome Powell opened the door to interest rate cuts in September, claiming that “the negative side risk to employment is rising.”
On September 15, the Senate voted in favor of President Donald Trump’s choice to join the Federal President’s Committee in time for the rate decision meeting in September.
The Senate confirmed that White House Economic Advisors Council Chairman Stephen Milan voted in favor with a 48-47 vote. He is set to fill in the empty seats left by former Fed governor Adriana Kugler, who resigned from the role in August. The term is expected to end in January.
Milan’s nomination spurred questions from lawmakers and was concerned that it would succumb to Trump’s demands for a more aggressive interest rate cut. Milan claims he is committed to maintaining his independence from Fed politics.
“If confirmed by his role, I will act independently so that the Federal Reserve always acts on my own personal analysis of economic data and on my own personal analysis of the impact of economic policy on the economy, and on the best possible economic policy judgment.”
Milan is scheduled to attend the Fed’s upcoming monetary policy meeting, which begins on September 16th. The central bank will announce its interest rate decision the next day.
Trump is approaching the majority of the Fed Committee
With Milan’s confirmation, Trump is one step closer to having a majority of seven Federal Reserve appointees.
Two other members appointed by Trump in his first term, Christopher Waller and Michelle Bowman, opposed the Fed’s July decision to stabilize interest rates.
Trump is also working to fire Gov. Lisa Cook, but the move has been challenged in court. The September 15th Court of Appeal opposed his administration’s attempt to remove cooks from the Fed ahead of future meetings.
The Fed’s benchmark rate has been stable in the 4.25% to 4.5% range since the second half of 2024, with the Fed refraining from cutting to see how it affects consumer prices.
According to a recent memo from JP Morgan’s Michael Feroli, investors and many economists are hoping to cut points by a quarter in September, but Waller, Bowman and Milan could push for a more aggressive half-percent point cut.
Trump continues to call for positive interest rate cuts in a true social society, writing that Fed Jerome Powell “now we have to cut interest rates greater than he had in mind.”
Concerns about the Fed’s independence
During a Senate confirmation hearing in early September, lawmakers grumbled Milan burning Gran and whether they would commit to maintaining their independence from Fed politics. Milan denied the accusation that he was a Trump “doll” and told lawmakers he was “very independent.”
Before joining the Economic Advisors Council, Milan proposed a series of reforms to strengthen presidential oversight for the Fed and regional reserve banks, claiming that current governance “fostered group thinking that led to significant monetary policy errors.”
In the 2024 essay, Milan argued for the short terms of the governor. It was clarified that members will serve “at the will of the President of the United States.” Allow governors to choose president of the local reserve bank. And despite Milan herself jumping out of her advisory role in the White House, she bans “revolving doors” between the administrative department and the federal government.
Sen. Elizabeth Warren (D-Mass.) argued that Milan’s appointment would put the Fed’s independence at stake.
“No one — not the American masses, not the investor at home here, nor the global financial market — would trust him as an independent voice,” Warren said at Milan’s confirmation hearing. “Every claim he makes and every vote he takes will be contaminated with suspicion that he is a Donald Trump doll, not an honest broker.”
A recent memo from Ey-Parthenon chief economist Gregory Daco said the rise in political attention would “introduce a complex additional layer” to the Fed’s meeting.
“Recent political noise can affect market expectations, raise risk premiers, and constrain the flexibility of the Fed’s policy if its reliability is questioned,” Daco wrote on September 12, adding that he hopes Powell will reaffirm the importance of the Fed’s independence while explicitly maneuvering comments on specific political developments.
Will Milan quit the White House Economic Advisors Council?
Milan will take unpaid leave from his advisory role at the White House. He said he would resign from the White House Economic Advisors Council if asked to fill in the long term.
Trump believes Milan is taking a step forward to finishing Cook’s term, which is scheduled to end in early 2038.
Trump announced his intention to fire the cook in August, claiming accusations that he would allow the cook to fire her for a “cause” by listing two properties as major residences before joining the Fed. Cook, who denied fraud, has not been charged with a crime and is fighting Trump’s attempt to fire her in court.
Reuters reports that Cook claimed his Atlanta home was a “home for vacation.” Loan estimates report it countering other documents Cook’s critics cited when they condemned mortgage fraud. According to Reuters, Cook “has no reason to believe it” the Property Tax Office in Ann Arbor, Michigan, has broken the tax credit rules for the home she declared as a primary residence.
