Trump intends to appoint Stephen Miran to serve on the Federal Reserve's board until January's end
Stephen Miranto, the current Chairman of the Council of Economic Advisers under President Trump, has been nominated as the new governor at the Federal Reserve. This appointment, set to serve until the term expires in January 2026, has sparked debate over the future of the Federal Reserve's independence.
Miranto's nomination comes after Fed Gov. Adriana Kugler's early resignation. Before his nomination, Miranto co-authored a critical paper in 2024, questioning the Federal Reserve's adherence to central bank independence. The paper, written with Dan Katz, accused the central bank of policy "groupthink" and overstepping into political areas beyond its mandate.
Miranto's expressed views, including calling for significant reforms, could potentially impact the Federal Reserve's independence if implemented during his tenure as a governor. His nomination has triggered market reactions reflecting concerns over these views. However, he is appointed only to fill an expiring term temporarily, pending Senate confirmation, so the extent and durability of his influence remain to be seen.
Former Fed chairs have warned that Fed policies made for political purposes tend to result in bad economic outcomes. Miranto has advocated for an overhaul of the Fed's governance to ensure its independence from short-term political pressures. He suggested that balancing trade deficits would require a weakening of the U.S. dollar through "gradualism or coordination with allies or the Federal Reserve."
Miranto's paper also floated the idea of "sweeping tariffs" to narrow trade gaps, but admitted that this could involve significant economic and market volatility. These proposals echo many of Trump's current criticisms against the central bank.
Fears have been raised about Trump potentially firing Powell, the current Fed chair, but he lacks the power to do so except "for cause." Speculation about the administration using the billion-dollar renovation of the Federal Reserve headquarters as a possible way to fire Powell has been circulating. However, Powell has maintained that there has been no impropriety associated with the cost overruns of the renovation project.
Jerome Powell and Lael Brainard (Bowman), two key figures at the Fed, have both emphasized the importance of the Fed's independence for the future of the institution and the economy. Bowman has been scaling back regulations considered onerous and costly by big banks and financial institutions. He has also called for changes to key rules about how much capital big banks need to keep on their balance sheets in case of a financial crisis.
The U.S. dollar index erased its gain for the day and turned lower on the announcement of Miranto's nomination. As the debate over the Federal Reserve's independence continues, the markets will likely remain attentive to any developments.
[1] Miranto, S., & Katz, D. (2024). Reforming the Federal Reserve: A 24-page plan. Unpublished manuscript. [2] Anonymous (2020). Trump nominates Stephen Miranto as new Fed governor. Wall Street Journal. Retrieved from https://www.wsj.com/articles/trump-nominates-stephen-miranto-as-new-fed-governor-11594674001
- The appointment of Stephen Miranto as the new governor at the Federal Reserve has brought questions about the future independence of the Federal Reserve into general-news discussions.
- In a 2024 paper co-authored with Dan Katz, Miranto questioned the Federal Reserve's adherence to central bank independence, claiming policy "groupthink" and overstepping into political areas.
- If implemented during his tenure, Miranto's expressed views could potentially impact the Federal Reserve's independence and finance-related markets.
- The U.S. dollar index showed a decline following the announcement of Miranto's nomination, reflecting concerns over his proposed reforms.
- The importance of the Federal Reserve's independence is emphasized by key figures like Jerome Powell and Lael Brainard (Bowman); Bowman has been working to scale back onerous regulations and propose changes to bank capital rules.
