Kugler resigns early, Trump intensifies pressure on Powell to step down.
Federal Reserve Governor Adriana Kugler announced her resignation effective August 8, nearly a year and a half earlier than her original term end date in January 2026. This personnel change provides an opportunity for Trump to reshape the Federal Reserve's policy direction, and he quickly used Kugler's departure to exert greater pressure on Federal Reserve Chair Jerome Powell.
Trump posted on social media, stating: 'It’s too late! Powell should resign, just like Kugler, who was appointed by Biden. She knows he has made mistakes on interest rates. He should resign too!'
Source: Truth Social/@realDonaldTrump Trump posts that Powell should also resign.
Notably, Kugler's resignation letter did not mention any policy disagreements or dissatisfaction with Powell's position.
Before the last Federal Reserve meeting, Trump urged Powell to cut rates, but the Federal Reserve chose to keep interest rates unchanged. Kugler supported maintaining stable rates in her last public statement and did not oppose Powell's position. The market reacted strongly to this news, with the Bloomberg Dollar Spot Index falling 0.9%, and traders expect two rate cuts by the end of the year.
Trump announces successor candidates, four major candidates emerge.
In an interview with CNBC, Trump revealed that he might announce a new Federal Reserve Chair candidate 'quite soon' and stated that four candidates are currently under consideration. He also ruled out the possibility of Treasury Secretary Scott Bessent, saying he has declined to consider the position.
According to Polymarket data, Kevin Warsh, Kevin Hassett, and Chris Waller are the leading candidates to succeed the Federal Reserve Chair, with selection probabilities of 29.9%, 22.4%, and 16.3% respectively.
Source: Polymarket users predict the successor for the Federal Reserve Chair.
Although Powell's term doesn't end until May 2026, Trump has the authority to announce the next Federal Reserve Chair candidate now, which raises concerns about a potential 'shadow Federal Reserve.' According to White House reporters, potential candidates include Warsh and Hassett, economists favored by Trump. Kugler's early departure allows Trump to start influencing the Federal Reserve's leadership before Powell's term ends.
The market generally believes that Powell is unlikely to resign voluntarily. Polymarket data shows that the probability of Powell leaving before the end of this year is only 13%. Currently, there are no signs that Powell intends to resign, nor has the Federal Reserve Board taken any action to push him out or initiated any formal removal procedures.
Source: Polymarket users predict the probability of Powell leaving by the end of this year.
September rate cut expectations heat up, markets bet on a shift in monetary policy.
Despite ongoing political noise, traders still expect the Federal Reserve to cut rates by 25 basis points at its meeting on September 17. According to Polymarket data, the probability of a 25 basis point cut is as high as 71%, while the probability of keeping rates unchanged is 22%, and the probability of a significant 50 basis point cut is 8.3%, with the chance of a rate hike being less than 1%.
San Francisco Federal Reserve President Mary Daly recently signaled that rate cuts may begin soon and warned that more than two rate cuts may be needed this year. Daly pointed out that soft labor market trends and stable inflation could be reasons for rate cuts, and she stated that the timing for the Federal Reserve to initiate rate cuts is approaching.
Daly explained that the ongoing policy inaction may not align with the economic conditions. She supported the decision to maintain interest rates steady in July but expressed increasing unease about further delays in rate cuts. Daly warned that waiting too long could harm the labor market and miss the optimal timing for policy adjustments. The U.S. added only 73,000 jobs in July, and the unemployment rate slightly rose to 4.2%.
Further Reading
For the first time in 30 years! The Federal Reserve's interest rate decision voting shows divergence, Powell firmly states no rate cut.
The cryptocurrency market is volatile, significantly influenced by Trump's policies.
Trump's personnel layout at the Federal Reserve has significant impacts on financial markets, especially the cryptocurrency market. When Trump indicated he would announce a Federal Reserve governor who supports rate cuts, the cryptocurrency market surged, with Bitcoin ($BTC) prices breaking the psychological barrier of $115,000. However, after Trump announced a plan to impose tariffs on India, the market dipped slightly, with Bitcoin quickly dropping below $115,000 from an intraday high of $115,524.
TradingView data shows that the cryptocurrency market has continued to fluctuate recently, with a total market capitalization of $3.65 trillion as of the time of writing. Bitcoin and major altcoins, including Ethereum ($ETH), Ripple ($XRP), and Solana, are all experiencing volatility. This is primarily driven by news of Trump's plans to appoint a new Federal Reserve governor, but the market remains cautious about whether there will be a rate cut in September.
Source: TradingView, the total market capitalization of the cryptocurrency market is $3.65 trillion.
At the same time, Trump plans to announce a successor for Labor Statistics Bureau Director Erika McEntarfer following the release of weak July employment data. The president claims that this data has been manipulated, and if true, this would undoubtedly be positive news for the market.
'The reshuffling of power at the Federal Reserve is imminent! Trump exerts pressure on Powell to resign, four major candidates emerge?' This article was first published on 'Crypto City'.