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The Federal Reserve finally cut interest rates today—but that’s not likely to stop the president’s pressure campaign against the central bank anytime soon.
Hesitant to overstimulate the economy amid the looming threat of “somewhat elevated” inflation, but also mindful of two consecutive weak jobs reports, the bank’s board voted for a middle path: a 0.25 percent cut to interest rates. That’s almost certainly less than Trump would like—he posted on social media over the summer that the rate was “AT LEAST” three points too high—but enough to let lenders breathe a little easier in the coming months and potentially encourage employers to start hiring. Still, this fairly standard rate cut is haunted by Trump’s repeated attacks on the Fed and its independence.
If successful, the Trump administration’s attempt to fire Lisa Cook, a Biden appointee and the first Black woman to sit on the Fed board, would mark the only ousting of its kind since the institution’s establishment, in 1913. Although the board’s governors are appointed by a president, they are not beholden to any president’s whims, and their full 14-year term ensures that their decisions are oriented around the long-term health of the American economy. Other presidents have pressured the Fed to adjust rates (the Nixon tapes revealed several testy conversations between the president and then–Fed Chair Arthur Burns), but only one has gone so far as to fire a governor. The move has already faced significant legal challenges: On Monday, a federal appeals court ruled 2–1 that Cook would be allowed to remain on the board in the near term and cast her vote today. The Trump administration is preparing to appeal that decision as it tests the limits of the central bank’s commitment to independence.
Another test of that commitment comes in the form of Stephen Miran, a brand-new board appointee replacing former Fed Governor Adriana Kugler, who abruptly resigned in August. Miran was nominated by Trump earlier this month, confirmed by the Senate on Monday, and sworn in yesterday morning—but more unusual than his accelerated confirmation is the fact that he is still a member of the Trump administration. In refusing to resign his position as chair of the White House Council of Economic Advisers while he serves on the Fed board (instead taking an unpaid leave of absence), Miran is at once serving “a president who has demanded that the Fed lower interest rates and sitting on the ostensibly independent board that sets interest rates,” my colleague David A. Graham recently wrote. “Conflicts of interest aren’t usually quite so obvious.”
That Miran was the only dissenting vote on today’s rate cut (he pushed for a more drastic, 0.5 percent cut) certainly won’t quash speculation that he’s a mouthpiece for Trump. But his first 24 hours on the board haven’t changed much: The modest 0.25 percent cut is more a direct response to worse-than-expected jobs data than a capitulation to Trump’s attacks. Because decisions are made by a collective vote, a rogue vote or two won’t sway an otherwise unified group. But that may not hold. If the courts clear the way for Trump to fire Cook, there’s nothing stopping Trump from installing a second governor who will advocate in his favor.
A quarter-percent rate cut won’t fulfill Trump’s personal wish for a return to the era of easy money, which is to say that it will probably deepen the rift between Trump and Fed Chair Jerome Powell. Trump called Powell (whom he appointed as chair during his first term) a “stupid person” back in June, and gave him the uninspired nickname “Too Late,” in reference to Powell’s perceived reluctance to lower rates. When Trump visited the Fed in July, after reportedly criticizing the ballooning costs associated with renovating two of its buildings, he and Powell appeared visibly uncomfortable in each other’s presence—Powell all the more so when Trump slapped him on the back and chided him once again for refusing to lower interest rates. In an apparent attempt to backtrack some of his more brazen moves, Trump told reporters yesterday that the Fed should remain independent—but also that it should listen to “smart people like me.”
If Trump eventually does somehow cow Fed officials into drastically lowering rates, the result would likely have lasting consequences: a boom in the near term and a bust in the long term. For now, the Fed is still independent; the relative restraint of today’s cut reaffirms that, even if Powell’s comments about the decision revealed no clues as to his confidence in the future. “We’re strongly committed to maintaining our independence,” he said when asked whether Miran’s membership on the board might involve the Fed in day-to-day politics. “Beyond that, I really don’t have anything to share.”
But it’s hard to imagine that Trump will back off: As the Fed scholar Lev Menand pointed out in The Atlantic last month, “the Federal Reserve is one of the few holdouts in Trump’s assault on American institutions,” which makes it only shinier a prize for a president bent on consolidating influence. Trump’s acolytes have already permeated Congress and the Supreme Court. With the appointment of Miran and the possible firing of Cook, the president is looking to command yet another instrument of American power.
Related:
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- Trump isn’t interested in competing with China.
- Russia’s new politics of abduction
- Annie Lowrey: The last Americans really paying taxes
Today’s News
- On his second day of congressional hearings, FBI Director Kash Patel claimed that court orders prevent him from releasing files related to Jeffrey Epstein, but a federal judge has disputed this, saying that the Trump administration has the authority to disclose them.
- In her first public appearance since being fired, former CDC Director Susan Monarez testified before the Senate that she was dismissed after refusing to approve vaccine recommendations made by the vaccine advisory panel before seeing the data and science behind them. A spokesperson for Robert F. Kennedy Jr. disputed her account ahead of her prepared remarks in the hearing.
- President Donald Trump and the first lady, Melania Trump, began their second state visit to the United Kingdom. They met with King Charles III and Queen Camilla today, and will sit down with Prime Minister Keir Starmer tomorrow.
Evening Read
It’s Fun to Be a Board-Game Sociopath
By Julie Beck
The one rule of Werewolf is: Don’t let them know you’re a werewolf.
Okay, there are a few more rules to the card game than that. You and your friends sit in a circle and are distributed cards, face down, that assign you to the role of villager or werewolf. No one knows who is who. If you are on the villagers’ team, you work with the other villagers to figure out who the werewolves are and kill them, by majority vote. If you are a werewolf, you want to hide that identity and cast suspicion on other people so that everyone will vote to kill a villager instead …
Some of my friends hate this game—the lying stresses them out, or they don’t like conflict. But what can I say? I love to betray my friends.
More From The Atlantic
- The outbreaks that could rise on college campuses
- What it’s like to work inside a broken CDC
- The economy is turning into a black box.
- The David Frum Show: The preventable return of deadly diseases
- Is this the end of the dictionary?
Culture Break
Watch. Task (streaming on HBO Max) is a new crime drama that has violence, vengeance, and a point to make about men, Sophie Gilbert writes.
Take a look. Here are some images of bird life from around the world captured by the winners and honorable mentions from the Audubon Society’s 16th-annual photography competition.
Rafaela Jinich contributed to this newsletter.
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The post The Fed Rate Cut Won’t Be Enough to Appease Trump appeared first on The Atlantic.
