[NEW YORK] The US Federal Reserve said on Friday (Aug 1) that governor Adriana Kugler is resigning early from her term and will exit the central bank on Aug 8, potentially shaking up what was already a fractious succession process for Fed leadership amid difficult relations with US President Donald Trump.
The Fed said in a statement that Kugler, who became a governor in September 2023, will leave before her term’s conclusion, which was scheduled for Jan 31, 2026. In a press release, the Fed said Kugler will return to Georgetown University as a professor next autumn.
Kugler did not attend this week’s rate-setting Federal Open Market Committee meeting.
Kugler’s early departure may shake up the timeline for the succession process now surrounding chair Jerome Powell, whose term ends next May. Trump has threatened to fire Powell repeatedly, believing interest rates should be much lower than they are.
Trump will now get to select a Fed governor to replace Kugler and finish out her term. Some speculation has centred on the idea that Trump might pick a potential future chair to fill that slot as a holding place. The White House did not immediately respond to a request for comment about the Fed appointment, although Trump said later he was happy to have an open slot to fill.
“I would not read any political motivation into what [Kugler is] doing, although the consequence of what she’s doing is she’s calling Trump’s bluff,” said Derek Tang, an analyst at LH Meyer, a research firm. “She’s putting the ball in his court and saying, look, you are putting so much pressure on the Fed, and you want some control over nominees, well, here’s a slot.”
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The mechanics of filling the soon-to-be open governor role have a number of moving parts that make it hard to say how Trump will approach finding a replacement for Kugler. Tang noted the president could even fill the position temporarily with a recess appointment while the Senate, responsible for confirming Board of Governors officials, is not in session.
There’s also some uncertainty about what would happen to someone quickly confirmed to the role, given that the term ends early next year, although some Fed observers noted a governor can stay in office in an expired term until a replacement has been confirmed.
Over recent days, Trump’s rhetoric about the Fed has remained heated, he called Powell on Friday “a stubborn MORON”, but he appears to have backed away from his threats to fire the central bank leader.
Challenging term
In a letter to Trump announcing her resignation, Kugler wrote “I am proud to have tackled this role with integrity, a strong commitment to serving the public, and with a data-driven approach strongly based on my expertise in labour markets and inflation.”
Kugler’s time at the Fed was a challenging one as central bankers raised rates aggressively to combat high inflation pressures. Those high rates have put them in the crosshairs of Trump and have caused economic challenges, although inflation pressures have moved much closer to the central bank’s 2 per cent target.
At the FOMC meeting this week, the Fed maintained its interest rate target range at between 4.25 per cent and 4.5 per cent as policymakers stayed on the sidelines to see how Trump’s aggressive regime of large import tax increases will affect the economy and inflation pressures. Two Fed officials opposed that stance and wanted a rate cut, worried that risks to the job market are rising and that the inflation threat posed by tariffs is transient.
The Fed’s dissenters found some support for their concerns in the release on Friday of weaker-than-expected jobs data that was particularly notable for downward revisions to the prior month’s job gains. Some Fed officials who spoke on Friday noted the report with concern but said they need to see more evidence that the job market is running into trouble before changing their views on monetary policy.
Trump reacted to the jobs data with a double-barreled attack, hitting the Fed for not cutting rates while directing his staff to fire the commissioner of the Labor Department’s Bureau of Labor Statistics, claiming without evidence the hiring numbers had been rigged. Trump’s move rattled markets and raised questions about the future integrity of one of the most important statistical reports that financial markets rely upon. REUTERS
