Trump Is Poised to Grab Control of the Fed Next Year

President Donald Trump has attacked Fed Chair Jerome Powell over cost overruns on the Marriner S. Eccles Federal Reserve building in Washington, D.C. (Samuel Corum/Bloomberg)

President Donald Trump wants the Federal Reserve to slash interest rates by three percentage points, a massive cut that could push borrowing costs back to pandemic lows. With two seats at the Fed likely opening up soon, he may finally get the chance to reshape the central bank and force the aggressive easing he is demanding.

Governor Adriana Kugler’s term expires in January 2026 and Jerome Powell’s term as chair ends in May 2026. If Trump replaces both and Powell steps down from the board entirely (a typical move for departing chairs), the president will be responsible for appointing four of the seven governors. That is a working majority alongside a chair who may share his appetite for deep rate cuts.

In theory, this could tilt the Federal Open Market Committee toward the kind of easing Trump wants. In practice, it isn’t that simple.

The Fed has held its benchmark rate steady at 4.25% to 4.50% despite cooling inflation and softening job growth. Powell says the committee needs more time to assess how tariffs and fiscal policy will ripple through the economy. He has made clear that July’s inflation report–released after the Fed’s next meeting–will be crucial. That makes a July cut unlikely.

Some of Trump’s Fed appointees are already laying the groundwork for easier policy. Governor Christopher Waller argues the labor market is weaker than headline numbers suggest and inflation risks are fading. He has hinted he may dissent at this month’s meeting if the committee doesn’t cut rates. Vice chair for supervision Michelle Bowman, also a Trump pick, has turned more dovish recently.

The timing of these shifts matter, says Will Denyer at Gavekal Research. Waller has emerged as a front-runner to replace Powell next year. Unlike other potential nominees, he is already a sitting governor, Senate-confirmed and widely respected within the Fed system.

But Trump’s three-point cut isn’t just unlikely, it’s out of step with current economic conditions. The economy is still growing at a moderate pace, inflation remains above the Fed’s 2% target and tariff uncertainty clouds the outlook. That hasn’t stopped the president from pushing. He argues ultralow rates would slash the cost of servicing national debt, posting on social media: “Very Low Inflation. One Trillion Dollars a year would be saved!!!” He’s also continued ad hominem attacks on Powell.

Market expectations are far more modest. Futures pricing suggests investors expect two quarter percentage point cuts by year-end, matching the Fed’s own forecasts. Citi economists see a September move as increasingly likely, especially if job market data weakens further. But that is a long way from Trump’s three-percentage-point target.

Economists warn that such dramatic easing would require a seismic shift in expectations. Nobel Prize-winning economist Paul Krugman has compared Trump’s approach to monetary policy to President Erdogan’s in Turkey, where politically driven easing led to runaway inflation and emergency hikes.

Whether Trump succeeds in reshaping the Fed depends on who he nominates and how far they’re willing to go. The window is opening. But for now, Powell is still chair and the center of the committee still favors caution. That could change in 2026.

Write to Nicole Goodkind at nicole.goodkind@barrons.com.