Tag: Federal Open Market Committee

  • Trump Administration Moves to Ease Firing of 50,000 Federal Employees

    Trump Administration Moves to Ease Firing of 50,000 Federal Employees

    February 5, 2026 – Washington, D.C. – In a bold push to streamline the federal bureaucracy and ensure alignment with executive priorities, the Trump administration is advancing a long-awaited regulation that could make it significantly easier to dismiss up to 50,000 career federal employees. The move, which revives a concept first floated during President Donald Trump’s first term, aims to reclassify high-ranking policy-influencing positions into a new category stripped of traditional civil service protections, allowing for quicker removals based on performance or policy execution.

    The U.S. Office of Personnel Management (OPM) is set to finalize a rule creating what it’s calling “Schedule Policy/Career,” a designation for senior roles involved in policy-determining, policymaking, or policy-advocating functions. This category, affecting roughly 2% of the federal workforce, would exempt these employees from the cumbersome procedural safeguards that have long made firing federal workers a protracted ordeal. According to insiders familiar with the matter, the regulation cleared its White House review late last week, paving the way for imminent publication in the Federal Register—a key step toward implementation.

    This initiative isn’t new; it echoes Trump’s 2020 executive order establishing “Schedule F,” which sought to address what the administration views as an entrenched “deep state” resistant to presidential directives. That order was swiftly rescinded by President Joe Biden in 2021, but Trump reinstated it on his first day back in office in January 2025, with modifications including the name change to avoid past legal pitfalls. OPM’s draft rule, released last April, estimated the impact on up to 50,000 positions, focusing on those where employees wield significant influence over policy outcomes.

    From a right-of-center perspective, this is a welcome crackdown on government bloat. Trump has repeatedly argued that the federal government is inefficient and overstaffed, with career bureaucrats often prioritizing job security over taxpayer value. “This effort ensures taxpayer dollars support a workforce that delivers efficient, responsive and high-quality services,” OPM Director Scott Kupor stated last month, emphasizing the need to hold underperformers accountable. Supporters see it as draining the swamp—removing obstacles to bold reforms in areas like immigration enforcement, energy deregulation, and economic policy.

    The headquarters of the Office of Personnel Management in Washington.
    The headquarters of the Office of Personnel Management in Washington. © Tierney l. Cross/Reuters

    Critics, including federal employee unions and Democratic lawmakers, decry the move as a thinly veiled loyalty purge. They argue it undermines the merit-based civil service system established over a century ago to prevent politicization of government roles. “This amounts to a loyalty test for federal workers, threatening the jobs of those who aren’t Trump supporters,” said representatives from groups like the National Treasury Employees Union. Lawsuits are already brewing, with challenges filed as early as January 2025 against the related executive order, and more expected upon the rule’s finalization.

    The administration counters that the rule is narrowly tailored to address “poor job performance or unwillingness to execute the administration’s policy agenda.” OPM officials have highlighted frustrations from agency supervisors who report “great difficulty removing employees for poor performance or misconduct.” Under current laws, firing a federal employee can involve lengthy appeals to the Merit Systems Protection Board (MSPB), often dragging on for months or years. The new category would shift these roles to “at-will” status, similar to political appointees, enabling expeditious terminations without such hurdles.

    This fits into Trump’s broader agenda of shrinking the federal footprint. In his second term, the administration has already taken aggressive steps, including reductions in force (RIFs) at various agencies. By October 2025, approximately 300,000 federal employees had exited the workforce—about 12.5% of the total—through layoffs, voluntary resignations, and attrition. Notable cuts have hit departments like Health and Human Services (HHS), which laid off 10,000 employees in April 2025, leading to a 25% staff reduction overall. Even science agencies haven’t been spared, with thousands trimmed through deferred resignations and targeted probationary reviews.

    A new executive order last week further tightens the screws on probationary employees, requiring managerial sign-off for permanent status rather than automatic conversion. This, combined with Schedule Policy/Career, signals a comprehensive overhaul aimed at injecting accountability into a system long criticized for insulating mediocrity.

    While left-leaning outlets portray this as authoritarian overreach, the reality is more pragmatic: Federal employment has ballooned, with staff often outlasting multiple administrations and embedding policies contrary to voter mandates. Trump’s first-term experiences, marked by leaks and resistance, underscored the need for such reforms. As he stated on social media, the rule will “allow agencies to quickly remove employees from critical positions who engage in misconduct, perform poorly, or undermine the democratic process by intentionally subverting presidential directives.”

    The proposed rule explicitly prohibits hiring or firing based on political affiliation, addressing concerns of discrimination. Yet, opponents fear it could chill dissent, turning nonpartisan experts into yes-men. Public comments on the April draft numbered nearly 4,000, many lambasting it on ethical grounds. Legal battles may delay implementation, as seen with a federal judge’s pause on similar actions at agencies like the Consumer Financial Protection Bureau (CFPB) last year.

    Still, for conservatives weary of endless bureaucracy, this is progress. It empowers elected leaders to enact the will of the people without sabotage from within. As Trump transitions into his second year, expect more such efficiency drives—potentially reshaping the federal government for generations.

  • Trump Has a New Opportunity to Influence the Federal Reserve

    Trump Has a New Opportunity to Influence the Federal Reserve

    In an unfolding drama at the intersection of politics and economics, former President Donald Trump is poised to gain new influence over U.S. monetary policy. The early resignation of Fed Governor Adriana Kugler, a Biden appointee, has opened a vacancy on the Federal Reserve’s Board of Governors—just as markets are betting on a looming interest rate cut following weak labor data.

    If reelected, Trump would have the opportunity to fill that seat—and later, Fed Chair Jerome Powell’s position in 2026—giving him a powerful lever to shape monetary policy, especially amid rising demand for rate relief.

    Adriana Kugler resigned effective August 8, nearly 17 months before her term was set to end in January 2026. Until now, her departure marks the first vacancy on the seven-member Fed board under Trump’s second term. Her exit presents Trump with immediate appointment power, allowing him to put a likely rate-cut advocate in place well before the September rate decision.

    Kugler’s early departure—unexpected for many political watchers—provides a rare opportunity amid increasingly charged discussions around Fed independence and political influence over interest rate decisions.

    On August 1, the July jobs report disappointed across the board: just 73,000 jobs added vs. expectations of ~110,000, and May/June revisions that cut 258,000 jobs combined. Unemployment ticked up to 4.2%, with labor participation falling further.

    The fallout was immediate: markets sharply increased the odds of a September Fed rate cut:

    According to CME FedWatch, cut odds jumped from 63.3% to 75.5%, then to about 88.2%, although Powell’s hawkish remarks later pulled them back somewhat. Inflation, however, remains above the Fed’s 2% target—with headline PCE at 2.6% and core PCE at 2.8% in June—temper market enthusiasm for a cut.

    At the most recent FOMC meeting, the Fed opted to hold rates at 4.25–4.50% for the fifth consecutive time. Chair Jerome Powell asserted the labor market was “broadly in balance”, but reiterated that persistent inflation and tariffs remain risks. These comments were interpreted as relatively hawkish—a stance that reduced cut odds temporarily.

    Still, the economic slowdown has emboldened voices like Atlanta Fed President Rafael Bostic and dissenter Christopher Waller, who support earlier easing, arguing the labor market impact is mounting.

    Trump continues to intensify pressure on Powell, calling him “too late” on rate cuts and firing criticism at the Fed’s approach.

    With the vacant seat, and several others looming in the next two years (including Powell’s chairmanship in May 2026), Trump may swiftly shape the Fed’s leadership. He has already narrowed his list of potential Fed chairs to four, including Kevin Hassett and Kevin Warsh, both aligned with his earlier economic views.

    Politico reports suggest Trump will avoid nominating Treasury Secretary Scott Bessent as Fed chair, favoring loyalists instead.

    Financial analysts caution: while Trump may not remove Powell mid-term, he could appoint a new governor now and a new chair later—creating a slow-motion shift at the institution’s helm.

    While markets rejoice at rate cut possibilities, economists warn premature easing could undermine inflation control. Bank of America and Morgan Stanley maintain that the Fed may stay on hold until 2026, pointing to strong labor metrics, rebounding consumer spending, and structural inflation risks tied to tariffs and demographics.

    Meanwhile, President Trump’s dismissal of the Bureau of Labor Statistics director, accused of manipulating data without evidence, has further spooked investors about the integrity of economic reporting—a move criticized for politicizing critical statistical institutions.

    Market Expectations: Futures markets have priced in nearly a 90% chance of a 25 bps cut in September, with the potential for additional reductions totaling 60 bps by year-end.

    Monetary Independence at Risk: Trump’s ability to appoint new governors—including a future Chair—raises concerns about political influence over the Fed.

    Economic Impact: Rate cuts would ease borrowing costs, boost equities (especially tech and growth stocks), and potentially weaken the dollar.

    Long-Term Policy Direction: A Trump-aligned Fed could steer toward looser monetary policy—even in the face of inflation risks.

    A rare vacancy on the Fed board—coupled with surging rate cut expectations—has given President Trump an opening to reshape U.S. monetary policy. With chairmanship up for grabs in 2026 and growing investor pressure for interest rate relief, the Fed sits at a crossroads. Under a second Trump administration, the institution that long stood aloof from politics may find itself aligned firmly with a new partisan economic agenda.

  • The Federal Reserve holds interest rates stable, resisting pressure from Trump, and offers no indication of a rate cut in September

    The Federal Reserve holds interest rates stable, resisting pressure from Trump, and offers no indication of a rate cut in September

    WASHINGTON – The U.S. central bank held interest rates steady on Wednesday and Federal Reserve Chair Jerome Powell’s comments after the decision undercut confidence that borrowing costs would begin to fall in September, possibly stoking the ire of President Donald Trump who has demanded immediate and steep rate relief.

    Powell said the Fed is focused on controlling inflation – not on government borrowing or home mortgage costs that Trump wants lowered – and added that the risk of rising price pressures from the administration’s trade and other policies remains too high for the central bank to begin loosening its “modestly restrictive” grip on the economy until more information is collected.

    While there will be two full months of data before the Fed’s September 16-17 meeting, Powell said the central bank was still in the early stages of understanding how Trump’s rewrite of import taxes and other policy changes will unfold in terms of inflation, jobs and economic growth.

    “You have to think of this as still quite early days,” Powell said in a press conference after the release of the Fed’s latest policy statement. “There’s quite a lot of data coming in before the next meeting. Will it be dispositive? … It is really hard to say.”

    Stock Widget

    Those comments, and others that placed the burden on upcoming data to convince policymakers that lower rates were warranted, led investors to reduce the probability of a rate cut in September to less than 50%, after entering this week’s two-day Fed meeting at nearly 70%. Treasury yields rose while the S&P 500 .SPX -0.15% ▼ and Dow Jones Industrial Average .DJI -0.08% ▼ equities indexes closed marginally lower.

    Powell “made clear that he thinks the Fed has room to hold the fed funds rate steady for a period of time and wait and see how much tariffs affect inflation,” said Bill Adams, chief economist at Comerica Bank, projecting that the central bank won’t cut rates until its last meeting of the year in December.

    “If the unemployment rate holds steady and tariffs push up inflation, it will be hard to justify a rate cut in the next few months.”

    The latest policy decision was made by a 9-2 vote, what passes for a split outcome at the consensus-driven central bank, with two Fed governors dissenting for the first time in more than 30 years.

    Trump has given Powell the pejorative nickname “Too Late” for his refusal to cut rates, but the Fed chief on Wednesday said his hope was to be right on time when the decision is made to lower borrowing costs, neither moving so soon that inflation reemerges, or waiting so long that the job market slides and the unemployment rate rises. Indeed, Powell said the fact that the Fed isn’t discussing rate hikes could be seen as a willingness to overlook some of the expected impact of tariffs.

    “If you move too soon, you wind up not getting inflation all the way fixed … That’s inefficient,” Powell told reporters. “If you move too late, you might do unnecessary damage to the labor market … In the end, there should be no doubt that we will do what we need to do to keep inflation controlled. Ideally, we do it efficiently.”

    The data since the Fed’s June 17-18 meeting has given policymakers little reason to shift from the “wait-and-see” approach they have taken on interest rates since Trump’s January 20 inauguration raised the possibility that new import tariffs and other policy shifts could put upward pressure on prices.

    Inflation is about half a percentage point above the Fed’s 2% target and has shown signs of increasing as prices of some heavily imported goods begin to rise, a process Powell said is expected to continue. As of June, Fed policymakers at the median expected inflation to rise further and end the year at about 3%.

    New inflation data for June will be released on Thursday, and a key jobs report for the month of July will follow on Friday, part of the data Powell said policymakers will evaluate as they debate a possible rate cut in September.

    Earlier on Wednesday, the U.S. government reported that economic growth rebounded more than expected in the second quarter, but declining imports accounted for the bulk of the improvement and domestic demand rose at its slowest pace in 2-1/2 years.

    chart
    A line chart showing the benchmark interest rate set by the Federal Open Market Committee

    ‘THOUGHTFULLY ARGUED’

    Along with Powell’s comments, the Fed’s new policy statement also gave little hint that rates were likely to fall soon, particularly with an unemployment rate that has stabilized around 4% as weaker hiring trends are offset by slowing growth in the labor force due to Trump’s immigration policies.

    “The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated,” the central bank said after voting to keep its benchmark overnight interest rate steady in the 4.25%-4.50% range for the fifth consecutive meeting.

    The two dissents came from Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, who has been mentioned as a possible nominee to replace Powell when the Fed chief’s term expires next May. Bowman and Waller, both appointed to the board by Trump, “preferred to lower the target range for the federal funds rate by one quarter of a percentage point at this meeting,” the Fed’s policy statement said.

    Powell characterized their opposition to the policy decision as part of a debate that was “argued, very thoughtfully … all around the table,” but with a majority of policymakers still reluctant to cut rates without more inflation data in hand.

    A bipartisan figure who was appointed to the Fed’s board by former President Barack Obama and later promoted to the top job by Trump, Powell voted to hold rates steady, as did three other governors and the five Fed regional bank presidents who currently hold a vote on the FOMC. The Fed’s regional bank presidents are hired by local boards of directors who oversee the Fed’s 12 regional institutions.

    Governor Adriana Kugler was absent and did not vote.

    Dissenting members of the FOMC often release statements explaining their vote on the Friday following Fed meetings.