How Easily Can Donald Trump Control the Fed? Potential Divisions

Donald Trump's potential return to the US presidency has sparked discussions about the influence he could exert on the Federal Reserve (Fed). With Adriana Kugler resigning from her position, Trump will have the opportunity to appoint a new member, possibly even the successor to Jerome Powell, whose term expires in May.

However, Trump's influence is not guaranteed. He will need to persuade the Federal Open Market Committee (FOMC) of the Fed with arguments based on economics, not politics. Loretta Mester, former president of the Federal Reserve Bank of Cleveland, emphasizes that the Fed chair must seek consensus with logical economic justification.

If Trump also appoints Powell's replacement, he will have appointed four of the seven Fed governors. Nevertheless, it is not certain that everyone will follow his instructions, as officials vote according to their conscience. Kathy Bostjancic, chief economist at Nationwide, believes that the new members of the FOMC may show resistance if they are influenced by political desires.

The regional presidents who will vote next year are John Williams, Beth Hammack, Lori Logan, Neel Kashkari, and Anna Paulson. Julia Coronado, founder of MacroPolicy Perspectives, believes that all four new voters are sensitive to financial markets and the credibility of the Fed.

If the new Fed chair fails to achieve consensus, there may be disagreements in the votes, creating doubts in the markets about the direction of the central bank. Waller warns that a lack of credibility could lead to higher interest rates.