US President Donald Trump pointed to Federal Reserve Chairman Jerome Powell on July 24, 2025, during a tour of the Federal Reserve Committee building currently under renovation in Washington, DC.
Kent Nishimura | Reuters
Last week, the surprising resignation of Federal Reserve’s Adriana Coogler, who appears to be in decline, recaptured a scenario that could have a significant impact on how central banks implement their policies.
With the open seating of the influential Central Bank Committee, President Donald Trump has many strategic options, including those that allow him to appoint a so-called shadow chair that will primarily serve as agitators until the successor of the current chair Jerome Powell is nominated.
This raises the appetite potential for an institution historically known for its consensus and ivory tower-like policy approaches to now have to deal with the sudden dose of political conspiracy.
Will Trump use this position to nominate Gadfly to torment Powell, a frequent target of ferocious criticism from the president, or will he pursue another strategy that focuses on the Fed’s long-term direction?
“The president has two options. One is that he can make a stop gap appointment to fill Coogler’s seats for the remaining four months of the remaining four months,” Krishna Guha, head of Global Policy and Central Bank Strategy at Evercore ISI, told CNBC on Wednesday. “Or he just decided to compress the whole process and choose someone who wants to be the Fed chair right now.”
Cooler’s decision to keep the Fed mostly informed is important in normal circumstances, but the nature of her situation on the board raises ante.
In 2023, former President Joe Biden appointed Coogler to that position, replacing Rael Brainard. Kugler served Brainard’s unexpired term of less than two years, with only about six months left.
Considering the Senate calendar, the new governor will need to serve at most three or four months, then have another confirmation hearing if Trump decides to re-appoint the person.
Trump could be seduced to go on the Shadow Chair Route – the Scott Bescent Treasury Department has advocated for that course – that could be an appetizing choice for candidates.
Shadow Chair “is still among many people and does not enjoy the power of the chairperson’s position,” Guha said.
“Apprentice” Fed Style
But for Trump, choosing a shadow chair is in line with his affinity for conflict and letting people prove themselves, Guha added.
“He likes to run things like “celebrity apprentice,” Guha said on NBC on Trump’s former reality show. “He likes to try and have people try and duel each other. So he might be seduced by the idea of putting someone in his seat for a few months. If they pass the audition, they’ll be given the next Fed chair nod.
There will be additional risks during the period associated with Kugler’s announcement. If she had stayed in her seat, at least no reservation would have come until her term expired in January. The current window created by his resignation brings both opportunities and dangers.
Accepting such reservations is also a dangerous suggestion.
Trump has made it clear that he will only appoint governors who support the cut rate. The president says he not only wants to cut, but is looking for dramatic moves along the 3% point line. Former Fed Chairman and past Treasury Secretary Janet Yellen said Trump’s rates should be “terrifying for the market.”
“There’s some risk to the shadow chair, which is just four months old,” said Brian Gardner, Washington policy strategist at Stifel. “Someone can say something that bothers Trump. Maybe they have to take a position they hate Trump. Just talking about what we’re talking about makes it a more difficult option. That being said, I think the administration is thinking it’s an attractive idea and giving it flexibility.”
Next chair
I understand that, at least when it comes to Coogler’s vacancies, the Shadow Chair alternative is to appoint an actual person Trump wants to serve as a chair, and will be nominated when Powell is left.
In that case, it presents a more general approach and does not push the new governor into a potentially hostile relationship with his colleagues potentially serving for the next 14 years.
“Maybe they’ll do this as a backup plan and make sure they have the person they want when Powell’s chairman ends in May,” Gardner says.
White House officials did not respond to requests for comment.
Trump told CNBC on Tuesday that he has a choice of cooler seating for up to four finalists. One of the things that are in conflict is believed to be current Gov. Christopher Waller. Other names mentioned included economist and former World Bank President David Malpus and economist Judy Shelton.
The betting market has been split as a favorite of Warsh and Hassett, and Shelton is also interested. Treasury Secretary Scott Becent has pushed himself out of the fight, Trump told CNBC.
Assuming Powell leaves the board after he finishes the chairmanship after he is in office, Trump has the opportunity to hold the majority of his appointees in a group of seven. However, he will not have a majority of the rate setting federal open market committee, with a spinning cast of seven governors and five regional presidents. His current appointees are Christopher Waller and Michelle Bowman, and the vice-chairman in charge of overseeing the bank.
Trump has promised a decision in the coming days. However, he also said he would name Powell’s successor a few weeks ago, but hasn’t done so yet.
Yellen and others have criticized Trump for leaning very violently towards the Fed due to the lower fees.
The concern is that Trump is stepping into the Federal Reserve independence. Authorities feel that it is essential for proper monetary policy without political influence.
“There will be a bit of an institutional upheaval from the Fed,” Gardner said. Powell said in the early 1990s President George H.W. Bush had put low-cost pressure on then-raised chairman Alan Greenspan. “I think I’m in a safe place for now, but things can change, so I don’t think it existentially at the moment, but of course, it’s a fluid situation.”
