Reappointments reinforce Fed independence — for now
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Every once in a while, something important happens that is largely unseen and, in the end, mercifully uneventful. That’s the case with the reappointment of Neel Kashkari as president of the Federal Reserve Bank of Minneapolis.
Briefly, the Federal Reserve’s board of governors unanimously voted to reappoint 11 Federal Reserve bank presidents to new five-year terms that start in March of next year. There are 12 bank presidents, but the head of the Atlanta Fed has announced he will retire.
These regional presidents, including Kashkari, rotate as voting members on the Federal Open Market Committee, the governing group that sets U.S. monetary policy (think interest rates). Kashkari will serve as a voting member for a one-year term starting in January 2026.
The reappointments only drew attention this time around because, among Fed-watchers, there had been widespread concern that the Trump administration might try to expand its influence over monetary policy by replacing regional bank presidents en masse. President Donald Trump has repeatedly criticized the Federal Reserve and called for sharply lower interest rates. He has publicly attacked Fed Chair Jerome Powell, labeling him “Mr. Too Late” and a “numbskull.”
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Regional Fed presidents are not appointed by the White House. They are selected by their regional bank boards and then approved by the Federal Reserve Board in Washington. The White House has no direct authority to fire them. However, they are not Senate-confirmed and serve renewable terms, a structure that some Fed analysts saw as a structural vulnerability. Political pressure, they worried, could be applied indirectly by influencing the Board of Governors or regional bank boards to block reappointments. The Federal Open Market Committee could be gradually overhauled with members who shared President Trump’s policy outlook without changing the law.
Against that backdrop, perhaps too clever by half, the decision to reappoint all of the regional bank presidents—except the one who is retiring—signals that the Fed’s institutional independence remains intact, at least for now.
That “for now” matters. Stephen Miran, Trump’s former chair of the Council of Economic Advisers, ascended to a vacant Fed governor seat, even as Miran continues to be paid by the White House. Trump is also attempting to remove Fed Governor Lisa Cook, a case that is now headed to the Supreme Court. In addition, the president has said he has largely made up his mind about who should replace Powell when the Fed chair’s term expires next year, making clear that his preferred successor would push aggressively for lower interest rates. (White House economic advisor Kevin Hassett appears to be the leading candidate, but Trump plans on a final round of interviews with three other candidates.)
Central bank independence matters because the economic evidence is strong that it’s a cornerstone of long-term stability. Independence does not mean the Fed never makes mistakes. It has, it does, and it will. Nor does independence mean a lack of accountability. The institution operates within a system of checks and balances, including regular congressional oversight.
But the lessons of economic history are clear. The economy’s dynamism suffers when political pressure holds sway over monetary policy. The inflation of the 1970s stands as a cautionary tale. Restoring Fed independence in the early 1980s helped anchor inflation expectations for decades. When households, businesses, and investors believe the central bank will lean against inflation—even when doing so is politically unpopular—controlling inflation becomes easier and less costly.
Last week, the Federal Open Market Committee cut its benchmark interest rate for the third time this year, in a divided decision. Kashkari did not vote, but he participated fully in the meeting and discussions, as all non-voting members do. When he becomes a voting member next year, his views will carry more weight. Based on his recent public comments, Kashkari remains concerned about how sticky inflation has been. It’s reasonable to expect that he may be cautious about aggressive rate cuts in the year ahead.
That dynamic could become especially interesting as a new Fed chair takes office after Powell’s term ends in May. The president has made clear that he expects an easier monetary policy under the new Fed chair. The institution’s independence remains under threat. Still, the reappointment of the regional Federal Reserve Bank presidents offers a small but meaningful sigh of relief.
