Federal Reserve shows unexpected unity, independence as it weathers Trump’s attacks

WASHINGTON (AP) – In what was expected to be a contentious Federal Reserve meeting, policymakers on Wednesday instead emerged with a nearly unanimous voice to cut interest rates by a quarter-point, tamping down — at least for now — concerns over its independence amid President Donald Trump’s relentless pressure for steeper cuts and his unprecedented effort to fire a top Fed official.

The Fed’s interest-rate setting committee went into the meeting with the economy’s future uncertain. The White House has also floated several members of the Fed’s governing board as potential replacements for the current chair, Jerome Powell, when his term ends in May, creating incentives for those officials to push for the deep rate cuts Trump has demanded.

As a result, some economists expected as many as three dissenting votes among the 12 voting members of the Fed’s policymaking committee, which would be the most in five years and somewhat unusual for a consensus-driven organization. Even four dissents – which hasn’t happened since 1992 – weren’t out of the question.

Trump has appointed three members to the Fed’s governing board – two in his first term – all of whom could have voted in favor of steeper cuts.

And many officials are wary of cutting too quickly, with inflation still clearly above the Fed’s 2% target. At least one of those policymakers could have dissented in the other direction – in favor of not cutting rates at all.

But in the end, the only dissent came from a Trump appointee, Stephen Miran, who was hurriedly approved by the Senate late Monday, just hours before the two-day Fed meeting began. Miran had sought a more aggressive half-point interest rate cut.

Brian Bethune, a Boston College economist, was impressed by the Fed’s unity in the face of White House pressure.

“They all came together to support what seems to be a very balanced decision,” he said. The nearly unanimous vote “sends a very strong message that they’re not going to bow to the monarch. They’re going to do what’s appropriate for the economy.”

Trump has said that one of the Fed governors he appointed in 2018 – Christopher Waller – is a potential replacement for Powell, and Waller dissented in favor of a rate cut in July, when the Fed kept borrowing costs unchanged. Another Trump appointee from his first term, Michelle Bowman, also dissented in July. Yet on Wednesday they both voted with their colleagues.

On social media, Jason Furman, a top economic adviser in the Obama White House, posted that he was “thrilled” that Bowman and Waller did not join in Miran’s dissent. “Bodes well for the Fed’s independence,” wrote Furman, now an economist at Harvard University.

In the weeks leading up to the meeting, Trump sought to fire Fed governor Lisa Cook, who was appointed by former President Joe Biden, after accusing her of mortgage fraud, which she has denied. It was the first time in the Fed’s 112-year history that a president has sought to remove a governor.

Many legal experts consider the firing a threat to the Fed’s independence, as Trump has openly discussed securing a majority on the Fed’s governing board. Cook sued to keep her job and a court ruled she could remain on the Fed’s board while her lawsuit is resolved.

An appeals court upheld that decision late Monday, enabling Cook to vote in favor of a rate cut Wednesday. Also late Monday, the Senate voted along party lines to confirm Miran as a Fed governor. He was sworn in Tuesday morning.

Previous presidents have appointed their economic advisers to the Fed. Former chair Ben Bernanke was an adviser in the Bush administration before being appointed chair of the Fed. But Miran’s case is unusual because he is keeping his position at the White House, while taking unpaid leave. His appointment only lasts until January, because he is completing a term after a previous governor, Adriana Kugler, stepped down before the end of her appointment. Yet he could remain in the seat until a replacement is named.

Powell has always sought to avoid a direct confrontation with Trump and avoided commenting on Cook’s case during a news conference Wednesday, and he didn’t say anything directly about Miran’s status.

“We’re strongly committed to maintaining our independence and beyond that I really don’t have anything to share,” Powell said when asked about Miran.

Powell also repeatedly noted that with inflation still above the Fed’s 2% target, while unemployment has also risen, it’s not clear what steps the Fed should take next. If it cuts its rate too much, it could overstimulate the economy and accelerate inflation. If it keeps its rate too high, an ongoing hiring slowdown could get worse.

“It’s challenging to know what to do,” Powell said. “There are no risk-free paths now.”

Nevertheless, “we came together at the meeting and acted with a high degree of unity,” he added.

Claudia Sahm, a former Fed economist and now chief economist at New Century Advisors, said Fed policymakers likely acted out of support for the Fed as an institution.

“The institution is under attack,” she said. “This was not the time for three dissents.”

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AP Business Writers Paul Wiseman and Alex Veiga contributed to this report. Veiga contributed from Los Angeles.