Days before the Federal Reserve is set to vote on interest rates, the central bank isn’t even sure who will attend the pivotal meeting.
The ability of Lisa Cook, a Fed governor, to vote next week was thrown into doubt on Thursday after the Trump administration asked a federal appeals court to allow the president to remove her from her post while a lawsuit she has filed contesting her firing proceeds.
At the same time, Stephen Miran, President Trump’s pick for a separate Fed seat, could be confirmed by the Senate as early as Monday night, allowing him to cast a vote at next week’s meeting, which kicks off on Sept. 16.
The last-minute uncertainty over who will cast a vote stems from Mr. Trump’s desire to exert more influence over the Fed’s interest rate deliberations. The president has spent months castigating the Fed for not lowering borrowing costs and has begun trying to reshape the central bank with loyalists who share his belief that rates should be much lower.
Interest rate decisions are made by the seven-person Fed board as well as a rotating group of five regional presidents from the Reserve Banks around the country.
Removing Ms. Cook and putting Mr. Miran in place by Wednesday’s vote will not materially alter the Fed’s final decision — the central bank is poised to begin lowering interest rates after an extended pause. But it underscores the tumult that likely lays ahead as Mr. Trump continues his onslaught on the institution.
“This administration has demonstrated its ability, with the help of the judicial system, to capture federal institutions, and I think it is unlikely that the Fed survives that in its current form,” said Eric Winograd, an economist at the investment firm AllianceBernstein. “I suspect that the president is going to essentially take over the Fed one way or another.”
On Friday, Mr. Trump again made his intentions clear in an interview on Fox News.
Alluding to Ms. Cook, he lamented that “we have somebody that shouldn’t be there” who “did bad things.” Ms. Cook, however, has not been charged with or convicted of a crime and the alleged actions that the president has accused her of took place before she joined the Fed — arguments that a federal judge on Tuesday endorsed.
In her initial ruling, Judge Jia Cobb said Mr. Trump’s justifications for removing Ms. Cook did not meet the threshold for sufficient “cause,” which the law stipulates is the only justification a president can cite for removing a Fed official. On Tuesday, Judge Cobb said “cause” referred to job-specific actions undertaken while in the role. She also said Ms. Cook was not given adequate due process.
What Mr. Trump ultimately wants is a majority of policymakers on the Fed’s board carrying out his vision for the institution. That degree of support would confer him substantial leverage not only as it relates to interest rate decisions but also those related to the oversight of Wall Street and the Fed’s staff.
One of the most powerful things that a majority of governors could do affects the presidents of the reserve banks. Every five years, the Fed’s board must vote to approve the reappointment of all 12 policymakers. This is typically a routine matter, but the looming March deadline has now taken on new significance. If Mr. Trump has enough governors willing to do so, they could decline to reappoint the policymakers.
Even if Mr. Trump loses his fight against Ms. Cook, the abrupt departure of Adriana Kugler, another governor, in August gave him another opening. It is this term that Mr. Miran is set to fill. While it officially expires in January, Mr. Miran can technically stay on until the president announces a successor.
In a break with tradition, Mr. Miran said he would not resign his position as chair of the Council of Economic Advisers while serving on the Fed, drawing a rebuke from Senate Democrats. Mr. Winograd said the arrangement was “absurd” and by “not giving up his day job, definitionally he is not independent at all.”
Mr. Miran, who is seen as a loyalist to Mr. Trump, is expected to support a swifter reduction in interest rates, something he could signal in economic projections he will have the opportunity to submit as a participant in September’s meeting. He also can also issue an official dissent on whatever the policy-setting committee votes for in favor of a larger move.
And if Mr. Trump proves victorious against Ms. Cook, that could lay the groundwork for a much more intense effort to oust other officials.
“The administration is looking for an effective template to take control of the Fed, and the Fed is much easier to break from within,” said Ed Al-Hussainy, a portfolio manager at Columbia Threadneedle. “If it’s drip by drip, one person at a time, then five years from now you have a different institution.”
Tony Romm contributed reporting.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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