The Senate takes control, the White House can no longer appoint "its own people", has the Federal Reserve's independence alarm been lifted?

Over the past two years, the Federal Reserve’s independence has come under rare pressure. The White House once attempted to remove a sitting Federal Reserve governor—an unprecedented move in the Fed’s history. However, with the shift in Senate control, the power of this maneuver is fading rapidly.

According to Chase Desk, JPMorgan chief economist Michael Feroli pointed out in a research report released on November 4 that the change in Senate control will significantly reduce the above risks. The reason is simple: appointments to the Federal Reserve board must be approved by the Senate, and now, the White House’s nominees must be acceptable to Democratic senators, or the seat will remain vacant.

Powell’s “Legacy”: The Sole Vacancy

In the next two years, only one seat on the Federal Reserve Board will expire—Powell’s own chairmanship, ending in January 2028.

This means that, under the new Senate dynamic, if the White House wants to fill the seat, it has no choice but to nominate a candidate acceptable to Democratic senators, or simply leave the seat vacant.

Feroli wrote in the report: “The election results mean the executive branch now needs to appoint a replacement for Powell who can be accepted by Senate Democrats, or else leave the seat unfilled.”

Wall Street Insights mentioned that US media also believe that the Democrats regaining control of the Senate, and especially the Senate Banking Committee, essentially blocks Trump from inserting allies onto the Federal Reserve Board. Longtime supporter of Fed independence Elizabeth Warren is expected to chair the banking committee, and Trump’s future nominations of Fed officials may face stricter scrutiny or even be stalled. This may also give the Federal Reserve and its chair, Warsh, more leeway to fight inflation via rate hikes.

What Is the Point of Removing Cook?

Previously, the White House had been pushing to remove Federal Reserve Governor Cook. But after the Senate power shift, the significance of such a move has been greatly reduced.

Feroli’s report spells out the logic straightforwardly: even if the removal succeeded, the open seat wouldn’t fall into the hands the executive branch desires. In other words, the political cost of removing Cook would not yield a corresponding personnel reward.

Besides the board, regional Fed president selections can also be indirectly affected.

The report notes that previous media coverage revealed the Atlanta Fed, in its search for a new president, had contacted at least one former Trump administration official. Feroli points out that the changes in the political landscape in Washington may alter the priorities of such selections.

However, this does not mean the Fed can now rest easy. The president still holds nomination power for governors, and the executive branch can still exert pressure on the central bank through other administrative and legal means. Democratic Senate control can block some appointments, but can’t entirely prevent the White House from pressuring current Fed officials.

New Pressures Facing Warsh

Current Federal Reserve Chair Kevin Warsh’s term ends in May 2030. Before the next election, the Senate’s political landscape is likely to remain dominated by Democrats—posing an additional challenge for Warsh’s reappointment.

Feroli wrote in the report: “Unless he’s content with serving only one term, Warsh needs to spend less time gazing out the window and more time walking Capitol Hill.”

This echoes the advice Powell publicly gave to his successor before stepping down. Powell once said: “Congress is the window between us and democratic accountability. Going to Congress and communicating with people is not a passive burden, but an active and regular duty.”