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The next Fed governor

Trump got a surprise last Friday when Fed Governor Adriana Kugler announced she would step down from her role early, effective August 8. With the open Fed seat, Trump can nominate someone to replace her, pending Senate confirmation.

For months, Trump has threatened to fire and replace Powell, only to repeatedly back off from his threat. Powell’s term is up in May 2026. But Kugler’s exit creates a vacancy that Trump can fill with someone who, like Trump, favors large-scale and immediate interest rate cuts.

That person could, in theory, become the next Fed chair when Powell steps down. Trump may even elect to preview that future role when announcing his appointment, creating a kind of “shadow Fed chair” that many economists have worried could undermine Powell’s authority and effectiveness.

Trump has routinely lambasted Powell and the Fed for keeping interest rates high – a decision Powell has said the majority of Fed governors made because the economy has remained robust and the impact of Trump’s tariffs on inflation remains uncertain. Howevert, that decision to keep rates steady has come under renewed criticism after Friday’s jobs data showed the labor market has been considerably weaker than initially expected over the past several months.