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Last year, a pair of scholars proposed banning the “revolving door” between the presidential administration and the Federal Reserve. The authors claimed that this step would be essential to curbing incentives for leaders to act in short-term political interests.

Eight months afterward, both authors – Dan Katz and Stephen Miran – joined the presidential team in senior roles. Recently, Stephen Miran, now head of the US Council of Economic Advisers, assumed a position as a governor at the Fed.

At his confirmation hearing, he pledged to preserve the central bank’s independence, but clarified he would remain from his administration job, instead taking a leave of absence.

Merely moments prior to the most recent central bank gathering, Miran was appointed to the leadership panel – while the president continued urging for the dismissal of a different voting member.

Executive Pressure and Interest Reductions

The president has repeatedly expressed his wish for the Federal Reserve to cut borrowing costs faster and deeper. Recently, he declared, “We’ll have a majority soon” on the policy-making committee.

In response to questions from reporters about the Fed’s autonomy, Trump replied, “It ought to be independent. But I think they should heed knowledgeable individuals, like me.”

Such open influence breaks with long-standing practices where commanders-in-chief usually refrain from interfering with interest rate decisions.

A Precarious Balance

This week, the Fed finally lowered interest levels by a quarter point, marking the initial decrease since last winter. Officials indicated that more cuts may follow.

However, a single member – Stephen Miran – disagreed, advocating a more significant half-point cut.

Many other policymakers voiced apprehension about inflation, which has stayed elevated in recent months. These officials emphasized the importance to balance economic stimulation with controlling inflation.

“Shifts in federal regulations are still unfolding, and their impacts on the economy are not yet clear,” stated Fed Chair Jerome Powell.

Organizational Independence Under Threat

In spite of the chairman’s confidence that rate decisions are guided by data and not politics, outside demands continue.

Trump is said to be pushing for the ouster of a Biden-appointed governor and aims to name a new chair when the current chair’s tenure ends in the coming months.

At present, though, Powell maintains that deliberations within the central bank are focused on convincing reasoning supported by economic data.

“It is ingrained of the institution,” Powell said. “It will remain unchanged.”

Yet, several observers question whether the Fed’s independence can survive such direct executive pressure.

While the president himself stated: “The Fed must take their own decision. Yet they should listen.”