Trump's Fed governor nominee Miran moves step closer to Senate confirmation

By Bo Erickson and Ann Saphir

Sept 10 (Reuters) - Stephen Miran, a top White House economic adviser, moved closer Wednesday to becoming a Federal Reserve governor, furthering President Donald Trump's effort to exert more direct control over interest rate policy and the central bank's broader role.

Members of the Republican-controlled Senate Banking Committee voted 13-11 in a party-line vote to send Miran's nomination to the full Senate for consideration. All Democrats on the panel voted against advancing the nomination while all Republicans voted in favor.

Lawmakers involved in the process say it is far from certain if the rest of the confirmation process can be completed in time for Miran to participate in the Fed's September 16-17 policy meeting.

TRUMP PRESSES CASE FOR RATE CUTS

A Senate Republican aide familiar with the confirmation process told Reuters that under the Senate's complex rules the earliest possibility for Miran's confirmation is Monday, leaving little time to complete other steps required before Miran can be sworn in.

But the 53-47 Republican majority in the Senate makes it likely that even if he is not there in time to vote on rates next week, he will get there soon after.

That development would give Trump, who has railed all year at Fed Chair Jerome Powell to lower interest rates, a like-minded voice and a close ally at the U.S. central bank's policy-setting table.

Trump plans to replace Powell, whose term as Fed chief expires next May, with one of three men. Each of those potential nominees has indicated support for big changes at the central bank to correct what Treasury Secretary Scott Bessent calls its "missteps," like maintaining rates at too high a level.

The Republican president also is trying to open a second seat on the Fed's seven-member Board of Governors with his attempted removal of Governor Lisa Cook over alleged mortgage fraud. Cook, who denies the allegation, sued to keep her job.

A U.S. judge on Tuesday ruled that Cook could do so while the court case proceeds, finding that she had made a strong argument that Trump did not have "cause" to fire her under the Federal Reserve Act, which is meant to protect the central bank against "coercive influence" from politicians.

The White House is expected to appeal.

Miran would join two Fed governors Trump appointed during his first term. Both called for a rate cut at the Fed's most recent meeting, and dissented when the majority voted to hold the policy rate steady in its current 4.25%-4.50% range.

"This nomination sets up an obvious Trump loyalty test for Dr. Miran," Democratic Senator Elizabeth Warren of Massachusetts said before she voted against advancing Miran's nomination. "He knows that every vote he takes determines whether he can go back to his White House job: that is not independence, that is servitude."

Republican Senator Tim Scott of South Carolina, who chairs the Senate Banking Committee, said Miran would bring "deep experience, proven leadership and a clear commitment to ensuring that the American economy remains strong and competitive."

Many Fed policymakers, including Powell, have signaled a willingness to lower rates at the coming meeting, given the weakening job market, a trend underscored by data on Tuesday that showed the job market was cooling fast even before Trump started his current term and began ratcheting up tariffs.

But Trump has pushed for far faster and steeper reductions than the quarter-percentage-point-per-meeting pace financial markets are betting on and which many analysts say is warranted, given the cooling labor market but also inflation that has made little obvious progress toward the Fed's 2% goal this year.

Data released on Wednesday showed producer prices were far more benign in August than economists had estimated, easing concerns about inflation. However, the government is expected on Thursday to report that consumer price inflation accelerated last month.

THREATS TO FED'S INDEPENDENCE

Miran at last week's hearing did not say if he felt interest rates should come down, though he did say he believes inflation is cooling and tariffs will not reverse that trend, views that would support the case for monetary policy easing.

Miran would be serving out the unexpired term of Adriana Kugler, who vacated her seat unexpectedly in August and had been a proponent of keeping rates on hold to prevent inflation from reigniting.

That term expires at the end of January. In a highly unusual move, Miran plans to take an unpaid leave from the White House rather than resign while he serves at the Fed.

He told lawmakers in a letter earlier this week that he will "reevaluate" that decision should a successor not yet be appointed by the end of his term, a situation that would clear the way for him to remain longer than four and a half months.

"Whether Cook is on and whether Miran is seated in time (for the Fed meeting) has little bearing on the September outcome in our view," Derek Tang, an analyst at LH Meyer, wrote in a note.

But both questions pose longer-term threats to the Fed's ability to do its job without regard to what politicians want in the short term, he said.

Fed governors' 14-year terms and the stipulation in law that they can only be removed by a president "for cause" and not over policy differences have long helped safeguard the central bank's independence, widely seen as key to its inflation-fighting effectiveness.

"If the Supreme Court ultimately embraces broad deference to the President's judgment as to what meets the 'for cause' standard for dismissal, Fed officials in future will have much weakened protection against political pressure," Krishna Guha, vice chairman of Evercore ISI, wrote in a note.