Changes Coming to the Fed?
In Maine, we discussed details about the Fed in confidence. Here’s a public discussion with similar details.
At Camp Kotok the risks to central bank independence and prospects of changes at the Fed were deeply examined in our discussions conducted under the Chatham House Rule. The campers included many who have had roles in the Fed or are currently in advisory roles, plus many familiar with the Global Interdependence Center’s College of Central Bankers. (Personal note: I serve on the CCB advisory board.)
Our private conversations must remain confidential. The videos that are coming will reflect what is publicly available, and numerous campers will write about the events and the gathering. In our survey of 45 participants on the question of who might succeed Jerome Powell as Fed chair, Governor Chris Waller received about half of the votes. A list of other candidates or possible nominees divided the rest. Only Peter Navarro received zero votes.
My opinion — Navarro policy is awful. He is an embarrassment to the Trump administration. The flawed chart that Commerce Secretary Howard Lutnick handed President Trump on “Liberation Day” in the Rose Garden is an example. Before the entire world, Trump read numbers from a chart that had a mathematical error. In five minutes, those with skills saw the error and were calling their CEOs or finance ministers. A brutal stock market selloff was triggered as we watched an erosion of trillions in wealth. Why? Because that chart proved that nobody proofed the calculations. Notice the silence about Navarro since the April market swoon. As far as I’m concerned, zero is too high a number to rate Navarro. (I wrote about the math error back on April 15. See “Trump’s Math Gaffes,” https://kotokreport.com/trumps-math-gaffes/.)
Anyway, clearly Navarro is not being considered for any Fed role. But policy changes at the Fed are in the works. Mickey Levy and Kathleen Hays did not attend Camp Kotok this year, so the interview we recommend to readers this morning is clearly not a violation of the Chatham House Rule that we follow in Maine. Speaking only for myself, I believe this short video covers the serious issues exceptionally well. In it, Kathleen Hays interviews Mickey Levy, a long-time member of the Shadow Open Market Committee and a visiting scholar at the Hoover Institution at Stanford University, for her podcast, Central Bank Central.
First off in their 17-minute conversation, Kathleen and Mickey consider important questions the Senate Banking Committee might ask in its confirmation hearings for Stephen Miran, whom Trump has nominated to serve the last six months of Fed Governor Arriana Kugler’s term on the Federal Reserve Board, following her departure. Miran is also the chair of the Council of Economic Advisors.
Levy points out that Miran is the architect of the Trump tariff policy blueprint. Miran originally articulated that blueprint in a paper titled, “A Users Guide to Restructuring the Global Trading System.” Levy deftly describes the Miran/Trump tariff policy as “totally outside the consensus of mainstream economists.”
Stephen Miran embraces equally radical ideas about Fed governance, and his vision does not respect the independence of the Fed. Instead, he envisions a presidential thumb weighing heavily on Fed policy. In a paper titled “Reform the Federal Reserve’s Governance to Deliver Better Monetary Outcomes,” Miran proposes radical changes in Fed governance, which Mickey reels off for listeners at one point in the interview.
And, yes, Miran will vote for rate cuts, which Mickey Levy expects to be the Fed’s next move as the Trump economy softens given fluctuating tariff policy and deportations.
Because Trump may “nominate a chair cut from the same cloth as Miran” and because Trump will be making additional appointments to the FOMC, the potential for changes in Fed governance has emerged as a far greater concern than the timing and size of rate cuts. Time will tell whether the Fed will be allowed enough independence to cleave to its dual mandate or whether monetary policy will succumb to the pleasures of a president and his advisors.
Kathleen Hays’ August 11 interview with Mickey Levy is a must-watch. Here’s the link:
“Levy Sees Trump Nominee Miran Pushing for Radical Changes in Governance of Fed” | Central Bank Central
