"Trump's Fed Gambit Tests Central Bank Independence"

Stephen Miran, President Donald Trump’s nominee to fill a vacant seat on the Federal Reserve’s Board of Governors, faces scrutiny over his potential ability to maintain independence amid his current role as chair of the Council of Economic Advisers. During a Senate Banking Committee hearing on September 4, Miran pledged to act independently if confirmed, emphasizing the central bank’s independence as “critical to the economy and financial markets.” However, Democratic senators questioned whether his continued affiliation with the White House would compromise the Fed’s autonomy. Miran stated he would take an unpaid leave of absence from his current position for the short four-month term, returning to the White House upon its conclusion, but would resign if appointed for a longer period. Critics, including Senator Jack Reed, called the arrangement “ridiculous,” raising concerns that it would allow Trump to exert undue influence over the Fed’s monetary policy [1].

Miran, a Harvard-trained economist, has previously advocated for reforms to the Fed’s governance structure. In a March 2025 essay for the Manhattan Institute, he proposed shortening governors’ 14-year terms to enhance democratic accountability and suggested greater presidential oversight. These views have drawn criticism from lawmakers who argue that such changes would erode the Fed’s insulation from political pressures. Miran defended his positions as proposals for reform, not as a blueprint for a Trump-aligned central bank. Nevertheless, concerns persist that his nomination reflects Trump’s broader strategy to reshape the Fed in line with his economic agenda [2].

The Fed, traditionally an independent institution, has come under unprecedented pressure from the Trump administration to lower interest rates. The central bank has resisted, maintaining a wait-and-see approach to assess the economic impacts of Trump’s trade policies. Miran, who has been a key architect of those trade policies, now faces a pivotal role in shaping monetary policy. His confirmation could enable Trump to solidify a majority of appointments on the Fed’s board, further amplifying his influence over U.S. monetary policy. Democrats have condemned the move, with Senator Elizabeth Warren warning that such actions could lead to a “recipe for disaster” reminiscent of the 1970s, when political interference led to stagflation [1].

Adding to the tension, the future of another Fed governor, Lisa Cook, remains uncertain. Trump’s recent removal of Cook from her post has sparked a legal challenge, with Cook alleging violations of due process. The Trump administration has justified the firing based on unproven allegations of mortgage fraud. The Justice Department is reportedly investigating the claims, complicating the legal landscape for Miran’s nomination. Some Democratic senators, including Warren, have called for a delay in Miran’s hearing until the legal issues surrounding Cook’s removal are resolved [1].

Despite the controversy, Miran appears poised for confirmation, with Republican lawmakers expressing strong support. Senate Majority Leader Mitch McConnell’s party holds the majority, and there are indications that the vote could proceed swiftly to position Miran for the Fed’s upcoming rate-setting meeting in mid-September. If confirmed, Miran could influence the central bank’s decision to lower interest rates, a move widely anticipated by market observers. His potential confirmation underscores a broader shift in the Fed’s governance, with implications for its long-standing independence and the broader U.S. economy [4].

Source: [1] Trump's Fed pick grilled over his ability to distance himself (https://www.cnn.com/2025/09/04/economy/fed-stephen-miran) [2] Stephen Miran pledges to uphold Fed independence without giving up White House role (https://finance.yahoo.com/news/stephen-miran-pledges-to-uphold-fed-independence-without-giving-up-white-house-role-181511975.html) [3] Trump's pick for the Fed board could join in time for key rate-cut vote (https://www.foxbusiness.com/politics/trumps-pick-fed-board-could-join-time-key-rate-cut-vote) [4] White House economist Stephen Miran likely to be confirmed to Fed board of governors (https://www.npr.org/2025/09/05/nx-s1-5528894/white-house-economist-stephen-miran-likely-to-be-confirmed-to-fed-board-of-governors)