On Friday, the Federal Reserve announced that Governor Adriana Kugler plans to step down on August 8, leaving a seat on the Fed’s influential seven-member board that President Trump could fill.
Reflecting on her service, she said, “I am proud to have tackled this role with integrity, a strong commitment to serving the public, and with a data-driven approach strongly based on my expertise in labor markets and inflation.”
Kugler’s term was originally set to expire in January, but she now intends to leave her post early on August 8. In her resignation letter, she provided no explanation for departing ahead of schedule.
President Biden had appointed Kugler to the Fed’s board in September 2023, making her the first Hispanic governor. Before her Fed tenure, she served as a Georgetown University professor and as the U.S. representative to the World Bank. She will rejoin Georgetown’s faculty this fall.
After Chair Powell said on Wednesday that rates would stay the same, President Trump ramped up his criticism. Powell warned it could be months before the Fed knows how tariffs are affecting the economy and inflation.
Prior to Friday’s jobs numbers, Trump took to Twitter to call Powell “a stubborn MORON” and insist that rates be “substantially lower, NOW.” The report showed that hiring cooled in July and that the May and June figures were lowered.
Trump gets another better opportunity to influence Fed Policy
Kugler’s departure gives Trump another chance to challenge Chair Powell, as he only needs Senate Republicans to approve his nominee.
Trump’s ongoing criticism of Powell’s decision to maintain current rates underscores his desire for a more accommodative policy. As Cryptopolitan reported, Trump might not be able to fire Powell, but appointing a like-minded governor could increase pressure within the board to cut rates. However, the Fed is set up to stay independent from politics, with governors serving 14-year terms.
This could lead to a tough Senate confirmation, but if Republicans stick together, Trump could fill the seat without Democratic votes.
Earlier this week, Powell indicated that, based on current data and risk assessments, the Fed would hold its primary rate at 4.25 %–4.50 %, a key determinant of borrowing costs across the economy.
To boost the economy, the Fed lowers interest rates so people and businesses can borrow more easily. To fight rising prices, it raises rates to make borrowing more expensive and slow down spending.
At the start of the pandemic, the Fed cut rates to near zero to avoid a major recession during lockdowns. But in 2022, supply problems and too much money in the economy caused high inflation, so the Fed raised rates to levels not seen since the 2008 crisis.
Trump, an outspoken advocate for domestic investment, argues that current inflation no longer needs such high borrowing costs. Over the last year, the Fed has trimmed its key rate by about 100 basis points.
On Wednesday, Powell warned that increasing tariffs may feed into consumer prices. “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” he told reporters.
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