The Federal Reserve lowering its benchmark interest rate to between 3.75% and 4% — their second rate cut this year — should have been the biggest news coming out of Wednesday’s Federal Open Market Committee (FOMC) meeting.
But the 25 basis point cut was overshadowed by the fact that the decision yielded two dissents — including one from Stephen Miran, a recent Trump appointee to the Federal Reserve Board of Governors.
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Miran, who assumed his role in mid-September, dissented (1) for the second FOMC meeting in a row, calling again for a half-point rate cut. (2) The other dissenter, Kansas City Fed President Jeffrey Schmid, leaned in the opposite direction, calling for the rate to remain as is.
“I would just point out that we have the situation where the risks are to the upside for inflation and to the downside for employment. We have one tool … you can’t address both of those at once,” Fed Chair Jerome Powell told reporters after the meeting when broadly discussing the issues that triggered dissent among the group. (3)
While there is precedent for multiple dissents around Federal Reserve decisions, (4) they are rare — with the last one occurring in 2019. Miran’s dissension, however, aligns with the repeated public declarations from Trump calling for a larger rate cut, thus raising questions about the political undertones rippling through the supposedly independent, non-partisan central bank.
Powell also noted that the Fed’s moves were made without the usual economic data provided by the government due to the ongoing shutdown. Instead, he said, they relied on data from private companies like HR software company ADP.
He also said that a third rate cut “is not a foregone conclusion … Policy is not on a preset course” when the group meets in December, likely setting up another showdown for dissension. As well, it was announced that December 1 would mark the end of the Fed’s balance sheet run-off — which could signal a nod toward liquidity and the quantitative easing that Trump has long championed. (5)
Political pressure on the Fed
Though Powell didn’t mention Trump during his talk with reporters, the shadow of the president and his preferred policies loomed large over the meeting.
A day earlier, while speaking at an APEC CEO’s event in South Korea, Trump referred to Powell as “incompetent” and by the nickname “Too Late” before adding that, after the Fed Chair’s term expires next year, a change in leadership will more closely reflect Trump’s economic vision. (6)
“We’ll appoint somebody that we all like because we should have the lowest interest rates of any country,” Trump said. “When we announce good news, we’re not going to have a Fed that’s going to raise interest rates because they’re worried about inflation in three years from now.”
Powell, in his remarks after the meeting, pointed to Trump’s tariffs, noting, “Higher tariffs are pushing up prices in some categories of goods, resulting in higher overall inflation.” He added that “our obligation is to ensure that a one-time (tariff) increase in the price level does not become an ongoing inflation problem.”
That being said, though the Fed didn’t announce specific plans for injecting liquidity to stimulate the economy, the move to finish up its balance sheet run-off signals something of a nod in Trump’s direction. (7) Though not necessarily done to appease the president, it does reflect his long-held desire for quantitative easing. Powell, for his part, maintains that the Fed is stable and that “everybody on the Committee is deeply committed to doing the right thing to achieve our goals — maximum employment and stable prices.”
All of this does, however, raise questions about continued dissension over how best to stimulate the economy going into 2026, as well as fears over further politicization of the Fed.
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Reshaping the Fed’s independence?
Looking ahead, questions around more partisan splits at the Fed and the possibility of relatively unpredictable rate fluctuations could result in consumers and investors alike taking a more cautious approach to everything from borrowing costs to portfolio management.
Market volatility is another major concern, as the Center for American Progress explained recently. “Knowing that the rates will be based on well-researched data, and not political whims, assures the world that the U.S. economy will remain relatively stable and its markets will remain rational,” the non-partisan policy institute wrote. “Few foreign investors want to risk their money in a volatile, unpredictable environment.” (8)
Meanwhile, Powell repeatedly referred to the “strongly different views” in the FOMC group that led to the dissension over the rate cut, saying they “were really about the future, what does that look like?” Which is a fair question, though perhaps not in the way Powell meant it.
Miran, for example, remains the chair of the White House Council of Economic Advisors, taking a leave of absence rather than stepping down when appointed Fed Governor — though he says he’ll resign if his current four-month stint in the role is extended. (9) That means the supposedly independent bank now has a direct line to the White House.
This week also brought confirmation that one of the candidates nominated to replace Powell as Fed Chair is Kevin Hassett, a staunch Trump ally who served as both an advisor and the current chair of the White House’s National Economic Council. (10)
Such moves raise questions about the Fed’s independence going forward, the easing and rate cuts it could affect, and the ensuing long-term implications.
Critics have pointed to examples of the disastrous consequences of exerting presidential pressure on central banks, from Richard Nixon to Turkish President Recep Tayyip Erdoğan — who both pushed to significantly lower interest rates which, ultimately, sent inflation skyrocketing. It’s a warning that forced short-term easing that seems like a political and economic boon could result in a larger inflationary blow in the long run.
As the Economic Policy Institute noted, “Presidential capture of the Fed would signal to decision-makers throughout the economy that interest rates will no longer be set on the basis of sound data or economic conditions.” (11) They added that, “Confidence that the Fed will respond wisely to future periods of macroeconomic stress — either excess inflation or unemployment — will evaporate.”
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Article sources
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CNN (1); CNBC (2, 5, 9); Federal Reserve (3); Reuters (4); The White House (6); Bloomberg (7); Center for American Progress (8); ABC News (10); Economic Policy Institute (11)
This article originally appeared on Moneywise.com under the title: Trump-appointed Federal Reserve governor breaks ranks with Jerome Powell — here’s why that matters for markets
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