President Trump’s call is catchy, but it misunderstands the wiring diagram
“A vacancy on the Fed is opening early as Trump urges board to ‘assume control’ if Powell doesn’t cut rates” — We were quoted regarding this by business reporter Marco Quiroz-Gutierrez at Fortune.
President Trump’s call for the Fed’s “board to assume control” if Chair Powell won’t cut rates is catchy, but it misunderstands the wiring diagram. The FOMC already is the board in question; 12 votes (7 governors, the NY Fed president, plus 4 rotating regional presidents) decide policy by simple majority.
QUOTED EXCERPTS
The FOMC meeting this week that kept rates unchanged between 4.25% and 4.5% saw the dissent of two Fed governors, Trump appointees Michelle Bowman and Christopher Waller.
It marked a rare break in what’s a typically unanimous vote, but it was far from a mutiny, said Michael Ashley Schulman, the chief investment officer of Running Point Capital Advisors.
Because interest rate decisions are decided by a simple majority vote by the FOMC’s 12 voting members, it’s possible Powell, who only gets one vote and no veto power, could be overridden. But it’s not likely, said Schulman.
“A handful of dissents shows the committee can grumble, but a successful revolt would need at least seven ‘nays’ against Powell, an inside-the-Fed version of turning the Succession board on Logan Roy,” he told Fortune, referring to the TV show about a corporate power struggle. “Odds remain low unless the data roll over hard or new appointees tip the balance.”
ALSO QUOTED in the article:
🟠Mark Spindel, CIO at F/m Investments
ADDITIONAL THOUGHTS
Powell holds one vote and the gavel, not a veto. So yes, in theory the other 11 hands could gang-up and lower rates over his objections, the monetary-policy equivalent of muting the Zoom host.
In theory, 11 govs could vote against Powell, but it’s as likely as Elon Musk quitting X to become a TikTok dance coach
In practice, it’s about as likely as Elon Musk quitting X to become a TikTok dance coach🕺🏻. Governors are Senate-confirmed, tend to align with the chair’s data-driven script, and outright chair-overrules have not happened in modern Fed history🧑🏻⚖️
Thus, Trump’s tweet makes good headline fodder and provides POTUS support to Michelle Bowman and Christopher Waller (who dissented in the latest vote); however, the FOMC’s plumbing renders a hostile takeover improbable but not inconceivable👸🏻
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