*** 12/12/25 - Fed Independence Just Got a Bit More Secure - Fed Board of Governors unanimously voted to reappoint 11 of the 12 regional bank presidents to five-year terms, eliminating a key threat to Fed independence.
Buzz Sawyer
Fed Independence Just Got a Bit More Secure
Jonathan Levin is a columnist focused on US markets and economics. Previously, he worked as a Bloomberg journalist in the US, Brazil and Mexico. He is a CFA charterholder.
Takeaways by Bloomberg AI
The American people got some reassuring monetary policy news on Thursday: The Federal Reserve Board of Governors unanimously voted to reappoint 11 of the 12 regional bank presidents to five-year terms. The vote eliminates a key threat to Fed independence and shows that the central bank will prove very hard to corrupt — no matter the White House’s desire for greater executive influence.
For now, that should take some pressure off longer-term government borrowing costs and reassure Americans worried that a politicized Fed could allow too-hot inflation to return.
Since he took office in January, President Donald Trump has been on an ill-advised mission to cram down lower policy rates at the world’s most powerful central bank. He has derided Fed Chair Jerome Powell by name; tried to remove Fed Governor Lisa Cook; and installed ally Stephen Miran as a governor after the exit of Adriana Kugler. And he has pledged to nominate a more sympathetic Fed Chair — perhaps National Economic Council Director Kevin Hassett — when Powell’s term ends in May.
Commentators who had feared that the reappointment of the regional bank presidents offered the White House an opportunity to disrupt the process and install allies can now put those fears to rest.
The Fed is, by design, extremely difficult to coopt, even with two or three appointments.
The central bank’s rate-setting body has 12 voting members at a given time: The seven members of the Board of Governors serve staggered 14-year terms that are purposely out of sync with the political cycle. And the other five votes come from the 12 regional Reserve Bank leaders, who aren’t directly chosen by the president. (The president of the Federal Reserve Bank of New York gets a permanent vote, while the other four voters cycle in and out on an annual basis.)
To cobble together the seven votes needed to sway monetary policy, Trump would have had to either replace the entire board (an almost certainly illegal endeavor) or to convince the governors to block the reappointment of the presidents (and then scheme to get sympathetic characters into those seats). Not only didn’t that happen for the 11 Reserve Bank presidents, but the unanimous vote suggests it wasn’t even a serious threat. The 12th Reserve Bank head, Atlanta Fed President Raphael Bostic, had previously announced plans to retire next year.
Trump’s effort to oust Cook is still before the Supreme Court, but the latest development already forecloses the most Machiavellian outcome.
Among the four presidents set to rotate in as voters next year, two of them — Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan — have been among the most hawkish Fed speakers in recent months. Minneapolis Fed’s Neel Kashkari has been cautious himself about rate cuts, and Philadelphia Fed President Anna Paulson, though more ambiguous, certainly wouldn’t rubber stamp rate cuts.
Of course, the market’s attention will now turn to Trump’s pick for Fed chair. If Trump chooses his long-time ally Hassett, the economist will have a lot to prove to Fed peers and financial markets skeptical that he can resist the president’s influence. An outspoken advocate for unconventional White House policies including tariffs, he’s likely to find that only sound and persuasive analysis of incoming data will convince his fellow policymakers that further rate reductions are called for.
As I’ve argued previously, Trump and financial markets may find a lot more to like in another candidate for the job: Fed Governor Christopher Waller. While Waller too has advocated for easier policy this year, he has the track record and institutional credibility to steer the central bank without engendering widespread dissents or prompting markets to worry about his motives. Since longer-term borrowing costs are partially a function of confidence — not just Fed policy — that may make Waller a much better candidate to help reduce rates on products such as 30-year mortgages.
But even if Trump ultimately settles on current-favorite Hassett as his pick, the latest development should eliminate concerns about a worst-case scenario for Americans and markets. Try as he might, Trump simply isn’t likely to succeed at undermining a well-designed independent central bank that’s currently packed with principled technocrats.