U.S. President Trump stated on Tuesday that he will decide on a nominee for the vacant Fed governor position by the end of this weekend and has narrowed the list of candidates to succeed Fed Chair Powell to four.
"I will make a decision by the end of this weekend," Trump said regarding plans to replace Fed governor Kugler (Adriana Kugler). Kugler unexpectedly announced last week that she will resign this Friday to return to teaching at Georgetown University.
Trump emphasized to reporters at the White House that the selection of Kugler's successor (whose term lasts only until next January) is a different process from choosing a replacement for Powell once he steps down in May. However, since other Fed governors, including Powell, have several years left in their terms, Trump's choice for Kugler's successor may affect his decision-making regarding the chair.
Trump stated that the candidates for chair have been narrowed down to economic advisor Kevin Hassett, former Federal Reserve governor and Trump supporter Kevin Warsh, and two others. Trump did not disclose the names of the other two, but speculation suggests one of them is current Fed governor Christopher Waller.
"We are also considering candidates for the Fed chair position, and the list has been narrowed down to four... two are Kevin and two others," Trump said.
Earlier that day, Trump told CNBC that Treasury Secretary Scott Bessent had withdrawn from consideration for the Federal Reserve chair position because he wished to remain as Treasury Secretary. He described Kugler's early departure as a 'pleasant surprise,' allowing him to immediately nominate someone to potentially succeed Powell.
Kugler's successor will initially be appointed to complete her remaining months in office. However, Trump made it clear that he plans to subsequently nominate that individual for a full 14-year term and to succeed Powell—this will give the nominee several months and multiple policy meetings to influence policy discussions.
"Many people are asking, why not directly choose the future Federal Reserve chair? That is also a possibility," Trump said in the CNBC interview.
Trump has criticized Powell for not lowering interest rates since he returned to the White House in January and even considered firing him. Meanwhile, Federal Reserve policymakers are weighing evidence of an economic slowdown and a weak labor market against the reality of inflation still far above the central bank's 2% target and expected to continue rising. Congress has tasked the Fed with maintaining price stability and maximum employment, and currently, these two objectives may conflict—leading to a difficult policy trade-off.
The nomination of Kugler's successor will require Senate confirmation, and if they are to obtain a full 14-year term early next year, another vote will be necessary. The nomination of a new Fed chair will require a separate Senate confirmation process.
The situation escalates
On the same day that Kugler announced her resignation, Trump fired the head of the Bureau of Labor Statistics (BLS), Erika McEntarfer, due to data showing a slowdown in job growth during the early days of his administration, and made unfounded accusations that the bureau manipulated employment data to undermine him.
Economists have warned since Trump's return to the White House in January that his tariff policy and erratic trade policies could lead to a slowdown in the labor market and rising inflation. This widespread expectation is one of the factors keeping the Fed from cutting rates until the impact of inflation becomes clearer.
The Federal Reserve left the policy interest rate unchanged at 4.25%-4.50% last week, but Waller disagreed, arguing that the inflation risks from tariffs are at most moderate while the labor market and overall growth are weakening. The employment report for July released last Friday showed weak monthly job growth and downward revisions to previous months' data, seemingly validating these concerns, leading to increased market bets on a rate cut at the Fed's meeting on September 16-17.
Firing the BLS head raised global concerns about the integrity of U.S. data, and economists and statisticians widely believe that Trump was 'killing the messenger.'
Michael Strain, director of economic policy studies at the conservative American Enterprise Institute, stated that Trump's choice of leaders for the statistics bureau and the Federal Reserve will be scrutinized more closely. "Imagine if you're worried that the head of an agency is a puppet, that data is being falsified... that's a more serious issue," Strain said regarding the BLS, adding, "Perhaps he realizes that independence is indeed important. Perhaps someone told him: 'Mr. President, if you appoint a Fed chair seen as a puppet, the consequences will be a thousand times worse than the BLS scandal.'"
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