However, the White House has also taken more extreme measures: threatening to fire Fed chairman Jerome Powell while insulting him personally, attempting to remove other members of the Federal Open Market Committee (FOMC), and visiting the central bank’s head office amid a tussle over renovation costs.
“Burns ultimately faced rebellion within the ranks of the Fed, and the Fed has been showing more independence of spirit in its voting patterns on policy of late, so one should be cautious of reading too much into the actions of a single individual at the Fed,” Donovan added.
This was a caveat echoed by Bank of America’s senior U.S. economist, Aditya Bhave, in a briefing with media yesterday. Responding to a question from Fortune about risks to the Fed’s independence under a new chairman, Bhave said the issue “almost depends more on what happens with the broader composition of the committee, rather than just the Fed chair.”
“The question then becomes, will Powell leave as a governor?”
Miran was Trump’s chair of the Council of Economic Advisers before replacing Adriana Kugler on the Federal Open Market Committee following her resignation earlier this year. He is expected to be a temporary appointment, serving out Kugler’s term expiring next month.
“[Powell] has been very noncommittal about that,” added Bhave. “There’s very little historical precedent for a chair sticking around as governor. It hasn’t happened, I believe, in the last 75 years, but he hasn’t said he’s going to leave.”
“I think those questions are much more important if you’re thinking about a wholesale shift in thinking at the Fed than just who the next chair is going to be,” Bhave added. “If you take this committee—that is so hesitant to allow Powell to even do the next 25 basis points of cuts—for our estimates, there’s about eight of the 12 regional Fed presidents who don’t want to do that cut, either very explicitly or they somewhat would prefer to not do it. If you take this committee and you put them up against a Fed chair that says, ‘You know what, I want to go to 2.5%,’ I just don’t think that chair can make a lot of progress in that scenario.”
