The resignation of Federal Reserve governor Adriana Kugler next week will create an opportunity for President Donald Trump to fill a slot on the central bankโs influential board. Despite not attending the Fedโs policy meeting earlier this week, Kugler was to complete her term in January but will instead retire on August 8, citing no specific reasons in her resignation letter.
The role of Federal Reserve governors is pivotal as they partake in deciding interest rates and oversee changes in banking regulations. Kuglerโs departure might pave the way for Trump to nominate a successor potentially succeeding Fed Chair Jerome Powell. Powell, who has faced frequent criticism from Trump for not lowering the Fedโs key short-term interest rate, is set to finish his term as chair by May 2026.
Expressing his satisfaction about filling the forthcoming vacancy, Trump mentioned he has โabout three very good โ Iโve got a lot of good candidatesโ for the Fedโs board. Candidates floated as potential replacements for Powell include Kevin Hassett, a senior economic adviser in the Trump administration, and Kevin Warsh, who served as a Fed governor between 2006 and 2011.
Trumpโs criticisms of the Federal Reserve persist, notably after Powell indicated the interest rates would remain unchanged for now. Powell further mentioned that the Fed might take substantial time evaluating the economic impacts of tariffs before cutting rates as per Trumpโs requests. Prior to the publication of the monthly jobs report on Friday, Trump expressed dissatisfaction via a post where he labeled Powell โa stubborn MORONโ demanding immediate rate cuts.
Adriana Kugler, appointed to the Federal Reserveโs board of governors by President Joe Biden in September 2023, marks a significant milestone as the boardโs first Hispanic member. Before joining the Fed, she was a professor at Georgetown University and served as the U.S. representative to the World Bank. Following her resignation, Kugler will return to her academic role at Georgetown in the fall.
In her farewell note, Kugler took pride in her performance, mentioning her commitment to public service and her reliance on data-driven practices to tackle labor markets and inflation issues. Two weeks ago, during her final speech as a Fed governor, Kugler supported Powellโs approach to keeping rates steady while assessing the tariffโs impact on inflation and the economy.
Meanwhile, Trump has signaled intentions to appoint Fed officials with a propensity to cut rates. A complicated facet of this scenario is Powellโs term as chair, ending in May 2026, while his board membership is valid through January 2028. This scenario potentially allows Powell to remain on the board post-chairmanship, as was seen with Marriner Eccles, Fed chair of the 1930s, who continued on the board after his term ended as chair.
If Powell opts to remain on the board, this scenario provides that Trumpโs administration could nominate someone to fill Kuglerโs spot, and subsequently elevate this person to Fed chair in 2026. Trumpโs potential strategy involves selecting a replacement governor who could successively ascend to the chairmanship upon Powellโs term completion. Powell has yet to declare his intentions concerning staying on the board after his tenure as chair ends.