MICHEL MARTIN, HOST:
The Federal Reserve begins a two-day policy meeting today that's likely to end with the central bank cutting interest rates for the first time this year.
A MARTÍNEZ, HOST:
But here's the thing, there's been some last-minute scrambling over who will take part in that rate decision. And it comes as President Trump has been waging an all-out campaign to get the Fed to lower interest rates.
MARTIN: NPR's Scott Horsley is with us now with the latest. Good morning, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Michel.
MARTIN: So what's the Fed expected to do this week?
HORSLEY: Markets are all but certain the Fed is going to cut its benchmark interest rate by a quarter percentage point. That would make it a little bit cheaper to finance a car purchase or bankroll a business or just carry a balance on your credit card. The Fed has been holding rates steady ever since December, partly out of concern that President Trump's tariffs might rekindle inflation. That concern has not gone away, but it has taken a backseat for now to worries about the job market. You know, hiring has slowed sharply in recent months, so the Fed is expected to start cutting rates again to try to prevent the job market from weakening further.
MARTIN: So is Trump getting what he has made very clear that he wants?
HORSLEY: Well, he's getting a bit of what he wants at his lower interest rates. But, you know, the president wanted rate cuts months ago. And he continues to agitate on social media and elsewhere for bigger rate cuts now. He's repeatedly mocked Fed Chairman Jerome Powell for not acting more aggressively. And now the president is trying to reshape the committee that makes these interest rate decisions. Here's how Massachusetts Senator Elizabeth Warren described the president's high-pressure tactics at a Senate hearing earlier this month.
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ELIZABETH WARREN: He wants to install his lackeys so that we will have a Fed that uses its power to please the president, but that can't be trusted to keep inflation under control.
HORSLEY: And some of those personnel moves by the president have come to a head in just the last 24 hours or so.
MARTIN: So, Scott, tell us more about that.
HORSLEY: Well, the president has just installed one of his allies, White House economist Stephen Miran, to fill a short-term vacancy on the Fed's seven-member governing board. Miran was confirmed on a mostly party line vote by the Senate last night in the nick of time to take part in today's meeting. His appointment has raised eyebrows in part because Miran's not giving up his White House job. He's only taking a leave of absence. And critics warned that could give the president undue influence over the Fed, which is supposed to operate independently of the administration.
Even more controversial is Trump's effort to oust Fed governor Lisa Cook over unproven allegations from a Trump loyalist that Cook made false statements on a mortgage application years ago. Cook has denied any wrongdoing and gone to court to keep her seat on the Fed board. That also came down to the wire. A federal appeals court ruled 2 to 1 late last night to allow Cook to remain on the board, at least for now.
MARTIN: So big picture, Scott, what does all this drama at the Fed mean for the economy?
HORSLEY: Well, in the short term, not much. Neither Miran nor Cook is expected to cast a decisive vote this week on interest rates. But longer term, this is a real showdown over how much control the president is allowed to exercise at the central bank. And the stakes are high. As Senator Warren notes, whenever central banks operate under the influence of politicians, they typically do a worse job of managing inflation.
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WARREN: When the Fed loses its credibility, businesses and consumers stop trusting it to control inflation and start acting like inflation is here to stay. And that raises prices across the board for American families in the long run.
HORSLEY: That's why the Fed and other central banks were set up to be insulated from political pressure. That norm, like so many others, is now being tested by this president.
MARTIN: That is NPR's Scott Horsley. Scott, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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