Controversy over Federal Reserve Independence

According to procedural arrangements, Milan will fill Adriana Kugler’s unexpired term until January 2026. Kugler unexpectedly stepped down in early August this year; she had consistently advocated for maintaining stable interest rates to prevent a rebound in inflation.

Milan plans to take an unpaid leave from the White House during his tenure at the Federal Reserve, a move that is historically extremely rare. Earlier this week, Milan stated in a letter to congressional lawmakers that if no successor is appointed before his term ends, he will "reassess" this decision, paving the way for him to remain at the Fed indefinitely.

Several Fed policymakers, including Powell, have hinted that they are willing to cut interest rates at upcoming meetings due to weakness in the labor market. However, Trump has consistently called for faster and larger rate cuts, exceeding market expectations of a 25-basis-point reduction per meeting and going beyond what many analysts consider "reasonable."

"In our view, whether Cook remains in place and whether Milan is confirmed in time (for the Fed meeting) will have little impact on the outcome of the September meeting," Tang wrote in the report. He stated that this would pose a threat to the Fed’s long-term capacity—making it difficult for the institution to operate without being influenced by politicians’ short-term demands.

For a long time, the 14-year terms of Fed governors and the legal provision that "only the president can remove a governor 'for cause,' not for policy differences" have been key barriers protecting the Fed’s independence. The Fed’s independence is widely regarded as crucial to its effectiveness in combating inflation. "If the Supreme Court ultimately defers broadly to the president’s judgment on what constitutes 'cause for removal,' the protection of Fed officials against political pressure would be significantly weakened in the future," wrote Krishna Guha, vice president of Evercore ISI, in the report.