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Kugler to step down from Fed board on Aug. 8, allowing Trump to fill her seat early
Federal Reserve governor Adriana Kugler said Friday she will resign from the central bank’s Board of Governors effective Aug. 8, meaning President Trump could have a replacement in her seat earlier than expected.
The term of Kugler, who was appointed by President Biden, was due to expire on Jan. 31.
“It has been an honor of a lifetime to serve on the Board of Governors of the Federal Reserve System,” Kugler wrote in an Aug. 1 resignation letter to President Trump posted by the Fed, which did not offer a stated reason for her early departure.
“I am especially honored to have served during a critical time in achieving our dual mandate of bringing down prices and keeping a strong and resilient labor market.”
Trump told reporters Friday afternoon that “I understand” Kugler’s resignation “was over the fact that she disagreed” with Fed Chairman Jerome Powell on interest rates.
“I have an open spot on the Federal Reserve Board,” Trump added. “I’m very happy about that.”
Kugler was not present at this week’s meeting of the Fed’s Federal Open Market Committee, or FOMC, due to what was described by the Fed as a “personal matter.” The FOMC voted at that meeting to keep rates unchanged and two Fed governors dissented from that decision — the first time that has happened since 1993.
Kugler, who has served as a Fed governor since Sept. 13, 2023, will return to Georgetown University as a professor this fall.
“I appreciate Dr. Kugler’s service on the Board and wish her very well in her future endeavors,” Powell said in a statement posted by the Fed. “She brought impressive experience and academic insights to her work on the Board.”
Trump and the White House have been considering candidates to replace Powell as chair once the chairman’s term ends next May, and one of those names could be appointed to fill Kugler’s seat as a prelude to becoming chair.
“We are going to get a shadow chair whether we want it or not,” Joe Brusuelas, RSM chief economist, told Yahoo Finance Friday.
“The pressure on the Fed to cut rates is going to intensify” and “the assault on the independence of the Fed is going to intensify.”
The people that have Trump has considered include National Economic Council Director Kevin Hassett, former Fed governor Kevin Warsh, and Treasury Secretary Scott Bessent, who last year suggested the idea of appointing a “shadow chair” as way of undermining Powell’s authority.
One sitting Fed governor, Fed governor Christopher Waller, is also considered among the possible choices to replace Powell eventually.
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Bessent, who is leading the search for Powell’s replacement, has already sketched out a scenario where the White House appoints someone to fill Kugler’s seat who can then be in the running to succeed Powell next May.
The White House also hopes that Powell decides to leave the Fed Board of Governors when his chairmanship is up, which would open up a second seat that Trump can fill. Powell has not yet said whether he intends to do that; his term as a Fed governor is not up until 2028.
The opportunity for the White House to fill Kugler’s seat earlier than expected comes as Trump applies pressure on Powell and the Fed board to lower rates by as many as 3 percentage points.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Trump said in a social media post Friday that the Federal Reserve Board should “ASSUME CONTROL.”
The president urged the board, which Powell chairs, to “DO WHAT EVERYONE KNOWS HAS TO BE DONE” if Powell won’t support lower interest rates.
Waller and Michelle Bowman, the two Fed governors who argued for a quarter percentage point rate reduction at the Fed’s last meeting on Wednesday, explained Friday in statements why they broke with Powell.
Both cited worries about the labor market as a reason to start cutting again.
“I believe that the wait-and-see approach is overly cautious, and, in my opinion, does not properly balance the risks to the outlook and could lead to policy falling behind the curve,” Waller said in his statement.
The statements from Waller and Bowman came just 30 minutes before July’s jobs report released Friday morning, which showed the US economy added fewer jobs than expected last month.
Traders raised their odds of a rate cut at the Fed’s September meeting to 80% following the release of that weaker-than-expected labor reading, after lowering them below 40% on Thursday.
Trump seemed to praise the Fed governors after their statements were released, adding in a separate Truth Social post: “STRONG DISSENTS ON FED BOARD. IT WILL ONLY GET STRONGER!”
There are seven seats on the Fed Board of Governors, and all seven hold spots on the FOMC, the powerful body that decides whether rates go up or down. Another five spots on the FOMC are held on a rotating basis by regional Fed presidents who are based around the country.
Whoever is US president gets to nominate all Fed governors — who then need Senate approval to be confirmed and serve 14-year terms — while the regional Fed presidents are picked by banks in their districts.
Trump spent much of Friday criticizing Powell on social media, even mentioning him in a post largely about his decision to fire the commissioner of the Bureau of Labor Statistics following a weak July jobs report.
“Jerome ‘Too Late’ Powell should also be put ‘out to pasture,’” Trump said.
Ben Werschkul contributed to this article.
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