Federal Reserve Faces Political Pressures as Trump Reshapes Leadership

The Federal Reserve, traditionally viewed as an apolitical institution, is showing signs of becoming more politically charged, with some observers drawing parallels to the U.S. Supreme Court [1]. This shift is being driven by a combination of changing governance patterns and rising political pressure, particularly from the White House. The Federal Reserve governors, who typically serve 14-year terms but often step down earlier, may now remain in office until a president from their political party is in power [1]. This development could lead to a more divided Fed, with split decisions becoming more common, especially in rate-setting meetings.

President Donald Trump has been a key figure in this shift, publicly criticizing Federal Reserve Chair Jerome Powell and demanding rate cuts. Trump’s rhetoric has extended to Fed Governor Lisa Cook, whom he has threatened to fire if she does not resign [1]. Cook, however, has refused to be intimidated and has announced plans to defend herself against allegations of mortgage fraud from a Trump administration official [1]. Her tenure, which could extend until 2038, is being watched closely as a test of how long Fed officials will stay under political pressure.

Trump has already reshaped part of the Fed’s leadership by appointing Stephen Miran to fill a board vacancy. Miran, who previously worked at the White House Council of Economic Advisers, has supported Trump’s call for lower interest rates and co-authored a paper advocating for a restructured, less independent Fed [1]. His appointment has raised concerns among analysts, with some describing it as an “existential threat” to the Fed’s independence [1]. The JPMorgan team warned that the move signals a potential effort to amend the Federal Reserve Act and alter the central bank’s authority [1].

The political implications extend beyond individual appointments. If Trump succeeds in naming a fourth governor, it could shift the balance of power on the 12-member Federal Open Market Committee. While the regional bank presidents still play a role, a majority of Trump-appointed governors could influence the Fed’s budgets, staffing, and the selection of regional bank leaders [1]. This potential realignment is seen as a departure from the Fed’s historical model of consensus-driven decision-making.

The first sign of this emerging divide came in July, when two Trump-appointed governors voted to cut rates—against the majority decision to hold rates steady [1]. The September meeting, where the Fed is expected to begin rate cuts, may further test the cohesion of the committee. While Chair Powell has indicated a willingness to ease policy, internal disagreements are already evident, with some members, such as Kansas City Fed President Jeffrey Schmid, maintaining a hawkish stance [1].

The comparison to the Supreme Court highlights a broader concern: the erosion of institutional independence. Just as the Supreme Court has become more polarized in recent years, with unanimous decisions becoming rare, the Fed may follow a similar trajectory. The central bank’s chair, like the chief justice, holds significant influence but is ultimately just one vote. As the Fed becomes more ideologically divided, the chair’s ability to maintain consensus will be increasingly difficult [1].

Sources:

[1] title: The Federal Reserve could start resembling the Supreme Court (url: https://fortune.com/2025/08/24/federal-reserve-governor-terms-supreme-court-justices-lisa-cook-powell-trump/)