By Jeff Cox
Federal Reserve Governor Adriana Kugler’s surprise resignation last week brought back a scenario that seemed to be fading but could have important ramifications for how the central bank conducts policy.
With the open seat on the influential central bank board, President Donald Trump now has a number of strategic options, including one where he could appoint a so-called shadow chair whose job would be largely to serve as an instigator until a successor to current Chair Jerome Powell could be named.
This in turn raises the tantalizing possibility that an institution historically known for collegiality and an ivory-toweresque approach to policy now will have to deal with a sudden dose of political intrigue.
Will Trump use the position to nominate a gadfly to torment Powell, a frequent target of blistering criticism from the president, or pursue a different strategy focused more on the long-term direction of the Fed?
“The president has two options. One is he can put a stop-gap appointment to fill the Kugler seat for the remaining four months of the unexpired term,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said Wednesday on CNBC. “Or he could just decide to compress the entire process and pick the person he wants to be the Fed chair now.”
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