FOMC lowered its benchmark overnight borrowing rate by 25 basis points, bringing down the target range to 4.50%-4.75%
The Fed’s interest rate decision on Thursday coincides with the electoral victory of Donald Trump, who won both the popular and Electoral College votes in a strong political comeback in U.S. history, with promises of lowering inflation.
In 2016, I wrote about how Trump’s presidency could change the future of the Federal Reserve. Eight years later, the uncertainty of what happens to the Fed remains the same, except that we are moving towards a different interest rates era now, and the inflationary environment is different.
Interestingly, under the administration of President-elect Donald Trump, the Fed itself may get a facelift.
A renewed focus on the Federal Reserve Transparency Act means audits of the Federal Reserve and Federal Reserve banks by the Government Accountability Office (GAO) which includes international financial transactions, transactions made under the Federal Open Market Committee (FOMC), and actions on monetary policy matters.
The Fed is a quasi-independent government agency and even though the president doesn’t have direct control, the central bank’s chair and board are actually selected by the president and confirmed by the Senate. With Republican control over the Senate, the election of the nominees might not be up for much debate.
With the term expiration of Chair Jay Powell in May 2026, Trump’s presidency will determine the Fed’s next Chair. Powell’s 14-year term as a governor at the Fed ends in 2028. Powell was appointed to lead the Federal Reserve during Trump’s first term. This year one of his closest economic advisors said Trump should nominate and get Senate confirmation to replace Powell well before his term ends.
“You could do the earliest Fed nomination and create a shadow Fed chair,” Scott Bessent, chief executive of the hedge fund Key Square, told Barron’s. But in an interview with Bloomberg, Trump said that if re-elected he would let Powell finish his term “especially if I thought he was doing the right thing.”
Trump will also be able to replace one of the seven-member of the Fed’s Board of Governors, Adriana Kugler in early 2026.
On his election trail, Trump promised lower prices to American voters — a path already taken by the Federal Reserve.