Divisions at the Fed are Growing: New President at Risk.

Fed Divergences and Challenges for the New President

The disagreements between inflation and employment targets at the U.S. Federal Reserve (Fed) point to a deepening problem in the upcoming period. Economic experts indicate that this situation could create significant challenges for the newly appointed Fed president and anticipate that the conflicts will continue until 2026.

Expert Opinions: Interest Rate Cuts and Future Scenarios

Deutsche Bank Chief Economist Matthew Luzzetti reported that current Fed Chair Jerome Powell managed to achieve a consensus on three interest rate cuts this year despite the division within the board. However, he emphasized that if inflation remains high and the labor market remains weak, it is unlikely that the new president will be able to achieve a similar consensus.

Luzzetti stated, “The most likely scenario will be the continuation of interest rate cuts. However, there is also a risk of a board emerging that demands interest rate hikes in the coming days,”

Independence Discussions and Management Challenges

Huntington Bank Chief Economist Ian Wyatt noted that reaching consensus within the Fed is becoming increasingly difficult, suggesting that the new president will face a serious management challenge if they hold differing views from the general trend of the board.

Trump’s Economic Policies and the Future of the Fed

The presidency of Donald Trump led the Fed to adopt a wait-and-see policy as it approached 2025. Fluctuations in tariffs and the effects of immigration policies complicated the Fed's economic assessments. Trump's reactions to Powell raised concerns about the Fed’s independence, and the newly appointed president will have to cope with these risks.

Additionally, the dismissal of Fed member Lisa Cook and the resignation of Adriana Kugler during the summer triggered a new period of uncertainty in the management of the central bank. The temporary appointment of Stephen Miran, the Chairman of Trump’s Council of Economic Advisers, reignited discussions regarding the Fed's independence.