The Federal Reserve (Fed) will hold the final Federal Open Market Committee (FOMC) chaired by Jerome Powell on the 10th, local time.
This FOMC is expected to signal that the Fed's era of independent currency policy will end for the time being. Wall Street and academia are paying closer attention to who will be tapped as the next "economic czar" by President Donald Trump than to the path of interest rates, and how much political pressure the Fed will be exposed to as a result.
According to major business outlets including CNBC and Bloomberg on the day, President Trump will begin back-to-back interviews with candidates for the next Fed chair on the 10th, timed to the end of Powell's final FOMC. Trump told the political outlet Politico that he will "choose someone as the next Fed chair who will immediately support rate cuts." Powell's term runs through May 2026.
But from the outset of his term, Trump has applied intense pressure on Powell and signaled multiple times that he would replace him before his term ends. He previously asserted presidential authority to intervene in currency policy by saying, "Firing a Fed chair is unprecedented, but it is not impossible."
This stance has not been mere bluster. On Aug. 8, the Trump administration moved to dismiss Fed Governor Lisa Cook, appointed under the previous Biden administration, citing issues with mortgage loan documents and other matters, in a bid to take control of Fed appointments. That runs counter to the intent of the 1913 Federal Reserve Act, which provides that a Fed governor cannot be removed without "for cause." It also directly challenged the long-standing practice of keeping the administration and the Fed at arm's length.
Bloomberg, citing experts, reported that "even the U.S. Supreme Court broadly recognizes the president's removal power over other agency heads, but the Fed is regarded as an exceptionally independent body in light of its historical particularity."
Kevin Hassett, who served as Chairperson of the White House Council of Economic Advisers (CEA) in Trump's first term, is seen as a leading candidate to succeed Powell. Hassett is viewed as the figure who best understands Trump's economic philosophy. The consensus is that he is highly likely to faithfully carry out the "low interest rates and high growth" stance Trump wants.
At an event hosted by The Wall Street Journal (WSJ) on the day, Hassett was asked, "Assuming you become Fed chair, what would you do if President Trump orders a rate cut?" He said, "You just do the right thing."
Experts warned that a "politicized Fed" led by administration-friendly figures would bring significant economic repercussions. The Peterson Institute for International Economics (PIIE), one of the most influential think tanks in economics, expressed concern in a recent simulation report with concrete figures. According to the report, if the Fed loses political independence under pressure from President Trump and undertakes excessive rate cuts, U.S. gross domestic product (GDP) this year would briefly grow above potential by 1.1 percentage points (p). But the price would be GDP falling 1.2% below baseline in 2028, with inflation surging up to 2.8 percentage points above the 2025 baseline.
PIIE said, "Currency easing that succumbs to political pressure will stimulate the economy for the first two years, but then the country will sink into more than a decade of stagflation with low growth and high inflation." It also offered a grim outlook that "by 2040, cumulative real GDP in the United States will be $2.5 trillion (about 3,680 trillion won) lower than if the Fed had maintained its independence," and that "the price level in 2040 will be about 41% above the baseline." The point is that seizing the reins of the Central Bank for short-term political gain ultimately comes back as a massive economic bill.
The Council on Foreign Relations (CFR) raised the level of warning by citing historical examples. In the 1970s, President Richard Nixon pressured then-Fed Chair Arthur Burns to lower interest rates for reelection. That triggered the era of "Great Inflation," with double-digit inflation through 1982.
CFR also cited a recent case in Türkiye. In Türkiye, President Recep Erdogan seized control of the Central Bank and installed a close aide as governor, pushing through reckless rate cuts that sent last year's inflation to 75%. CFR said it is "a vivid cautionary tale of how an economy can be wrecked when political power dictates currency policy."
Experts also said that no matter how much the United States issues a key currency, if trust in the Fed—which controls the money supply (M2)—collapses, a plunge in the dollar's status and a surge in Government Bonds yields (price decline) will be unavoidable. The Economic Policy Institute (EPI) said in a statement, "If the president takes control of the Fed, economic actors will believe interest rates are determined not by sound data but by presidential whims," adding, "It will heighten doubts about the Fed's ability to deal with the looming macroeconomic crisis."