Why Trump’s Fed Nominee Likely Won’t Make the September Meeting

President Donald Trump can reshape monetary policy ahead of schedule. (Win McNamee/Getty Images)

President Donald Trump just received an unexpected gift from the Federal Reserve: The chance to reshape monetary policy ahead of schedule.

Fed governor Adriana Kugler announced Friday that she’s resigning effective Aug. 8, almost half a year before her term was set to end in January 2026. Her departure hands Trump a rare mid-cycle opportunity to appoint someone who could shift the Federal Open Market Committee toward easier monetary policy.

Trump told CNBC on Tuesday that Kugler’s resignation “was a pleasant surprise.” The timing is particularly strategic because this appointee could be positioning themselves to replace Powell when the Fed chair’s term expires in May 2026. Trump said that he has narrowed the field to just four candidates for that future Fed Chair role, though the person would first need to serve as a governor before being eligible for promotion to chair.

He confirmed that Treasury Secretary Scott Bessent, previously considered a leading contender, is no longer in contention. “I love Scott, but he wants to stay where he is,” Trump said on Squawk Box.

Among the likely candidates are former Fed governor Kevin Warsh and National Economic Council director Kevin Hassett. Current Fed Governors Christopher Waller and Michelle Bowman are also thought to be in the running.

“Both Kevins are very good, and there are other people that are very good, too,” Trump said on CNBC, referring to Warsh and Hassett.

Trump hasn’t committed to naming a “shadow chair,” or someone who would serve as a governor for the next few months with the presumption that they would become chair when Powell’s term expires, but acknowledged on Tuesday that “it’s a possibility.”

The timing matters for policy as well. Kugler was considered one of the more hawkish governors on the FOMC, recently favoring higher-for-longer inflation rates to combat inflation.

Kugler’s exit, said Mark Malek, chief investment officer at Siebert Financial, should not be taken lightly. “If Trump replaces Kugler with a reliable dove or a Powell critic, you have a clear FOMC majority that could push for earlier cuts,” he wrote in a note. “That’s a real shift. Not just for optics, but for votes. Markets should care.”

But replacing a Fed governor isn’t as simple as Trump might hope and the timeline may not align with his expectations.

Fed Governors wield quite a bit of influence over the U.S. economy, the seven-member Board of Governors, nominated by the president and confirmed by the Senate, serve as the core of the Fed system. They have permanent votes on the FOMC, unlike the 12 regional Fed presidents who rotate voting rights. This gives the board more influence, holding seven of the 12 votes that determine interest rates affecting everything from mortgages to business loans.

Fed governor terms are structured to provide political independence. Each governor serves a 14-year term, with one term beginning every two years. Terms are staggered so that one president can’t stack the deck with appointees who favor particular policies. A governor who serves a full 14-year term cannot be reappointed, but someone completing an unexpired portion of a term like Kugler’s may be reappointed, serving longer than 14 years.

The confirmation process also reflects this emphasis on independence. Nominees must first be questioned and approved by the Senate Banking Committee then confirmed by the broader Senate. This could take about four to eight weeks once Congress is in session, according to analysts at Stifel. The Senate is currently on its August recess until just after Labor Day, making it highly unlikely Trump’s nominee will be sworn in before the Fed’s Sept. 16-17 meeting.

The Senate has also been willing to block Trump’s Fed nominees in the past. In November 2020, senators rejected a procedural vote to advance Judy Shelton’s nomination to the Fed Board despite Republican control of the chamber.

The chair and vice chair positions both require separate four-year confirmations from among existing board members. If Trump’s goal is installing his next Fed chair, that person would need Senate approval three times, first to fill the rest of Kugler’s term as governor, then to take on an additional 14-year term as governor, and finally to become chair.

“Ultimately, these appointments will test whether our economic institutions can remain independent amid growing political pressure,” Judith Raneri, vice president at Gabelli Funds, wrote in a report. “Who President Trump selects won’t just shape policy; it will send a clear signal to markets about the integrity of the data and decisions that anchor our economy.”

The confirmation process may be slow and deliberate by design, but Trump’s unexpected opportunity to reshape the Fed has already begun reshaping expectations about monetary policy. The question now is whether the Senate will cooperate with his timeline.

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