A Hawkish Board Member Suddenly Resigns... 'Shaking the Fed' Expected to Intensify

Expansion to Three Pro-Trump Board Members

80% Probability of a Rate Cut in September

Donald Trump, who has been pressuring Jerome Powell, Chair of the U.S. Federal Reserve (Fed), to cut the benchmark interest rate, now has the chance to nominate the next Fed Chair sooner than expected. Hawkish Fed Governor Adriana Kugler, who had been cautious about cutting rates, has suddenly resigned. As a result, Trump will not have to wait until the expiration of Kugler's term, initially set for January next year, and will be able to appoint someone of his choosing to the Board of Governors. There is also speculation that when President Trump appoints the new governor, he may keep the next Fed Chair in mind.

On the 1st, the Fed announced that Kugler will step down from the Fed Board on the 8th of this month. Considered a hawk even within the Fed, Kugler was appointed as a Fed Governor in September 2023 during the Joe Biden administration, and her term was set to last until the end of January next year. The reasons for her resignation are unknown.

On this day, Kugler sent a letter of resignation to President Trump, and Trump stated that he was "very pleased." He also wrote on his social media, "She (Kugler) knew that he (Powell) was acting incorrectly in rate decisions (which is why she resigned)," and asserted, "He (Powell) should also resign." Earlier that morning, he also urged Powell’s removal from the Fed Board through social media.

Kugler's sudden resignation is expected to further intensify President Trump's efforts to shake up the Fed. Trump can appoint Kugler's successor, which means that among the seven Fed Board members, those appointed by Trump—including Vice Chair Michelle Bowman and Christopher Waller—will increase to three in total. At last month's Federal Open Market Committee (FOMC), when the Fed decided to hold rates steady, Vice Chair Bowman and Waller called for rate cuts, revealing the largest split on the Board in over 30 years.

With Chair Powell's term ending in May next year, this presents President Trump an opportunity to bring his candidate onto the Board in advance.

In addition to Trump’s pressure, the Fed faces deepening concerns over rate decisions. This is because the employment report, released by the United States Department of Labor on the 1st, showed the U.S. job market deteriorating rapidly.

However, the market has already taken a September rate cut as a given. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, as of the 3rd, the probability the Fed will cut rates by 0.25% in September is viewed at 80.3%.

Reporter Han Kyung-je hankyung@hankyung.com