Former Kansas City Fed President Esther George Talks Trump-Cook Saga
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That's Vanguard.com slash audio. All investing is subject to risk. Vanguard Marketing Corporation Distributor. I'm pleased to say that we are now joined live by former Kansas City Fed President Esther George. Esther, thank you so much for joining us today. From where you sit as a former regional Fed president, do you see this as a legal dispute between President Trump and Lisa Cook, the private citizen who applied for mortgages before she was named to the Fed board? Or is this more a dispute between President Trump and the Federal Reserve as an institution?
Yeah, well, good afternoon. I think clearly this is another step in an ongoing pressure and attack on the institution in terms of the authorities of the executive branch relative to the Federal Reserve. And so however this plays out in terms of the details of the specific case that's been brought forward, I think what's at stake here for the American public is really to understand who will be influential in the decisions that the Federal Reserve makes in the years to come.
And personnel determines policy, as we've heard so many times from this administration. And the concern here is that the president will next target the appointments or the renewal of appointments of regional Fed presidents in February of next year. How concerned are you about that?
Well, I think it would be very concerning, and I'll tell you why, Scarlett. If you think about the origins of this institution, they were firmly anchored in making sure that political pressure would be as limited as possible in terms of the critical decisions that the Federal Open Market Committee has to make for the long run. And so the idea that you would structure the institution in a way that would protect that long run view and not drive it in the direction of short run decisions was critical. And it proved to be relatively durable over the last 100 plus years. So that's what's at stake, I think, as we look at how this unfolds is how will the decision-making process of this institution play out and really take a more long-term focus as opposed to shorter-term interest.
And Esther, how much of a distraction is this for Fed officials? Again, we do have a closely watched Fed decision next month, given the back and forth with President Donald Trump. Yeah, so there is a lot of noise going on, and I think it's most unfortunate because there is already enough uncertainty that's coming at the decision they have to make relative to the performance of the economy. This is a time as the economy is showing shifts, whether it's from policy, whether it's from cyclical factors, that you really want the committee to be able to focus on the debates they will be having at their meeting in September. And I suspect they are doing their best to spend their time focused on those key issues so that when they come to the table in a few weeks, they can really make those decisions in a manner that serves the public, serves the economy longer term.
And with that in mind, how does cutting interest rates next month, again, the market's pricing at an 85% chance, we have inflation still hotter than people were expecting. We have a jobs market that is strong and consumer spending showing no signs of slowing down. So what does that signal if and when we do get a Fed cut next month?
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