Trump faces a variety of choices as he seeks to fill Fed vacancies

Federal Reserve Governor Adriana Kugler’s surprise resignation last week brought back a scenario that seemed to be fading but could have important ramifications for how the central bank conducts policy.

With the open seat on the influential central bank board, President Donald Trump now has a number of strategic options, including one where he could appoint a so-called shadow chair whose job would be largely to serve as an instigator until a successor to current Chair Jerome Powell could be named.

This in turn raises the tantalizing possibility that an institution historically known for collegiality and an ivory-toweresque approach to policy now will have to deal with a sudden dose of political intrigue.

Will Trump use the position to nominate a gadfly to torment Powell, a frequent target of blistering criticism from the president, or pursue a different strategy focused more on the long-term direction of the Fed?

“The president has two options. One is he can put a stop-gap appointment to fill the Kugler seat for the remaining four months of the unexpired term,” Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said Wednesday on CNBC. “Or he could just decide to compress the entire process and pick the person he wants to be the Fed chair now.”

Kugler’s decision to leave the Fed with little notice would be important under normal circumstances, but the nature of her situation on the board raises the ante.

Former President Joe Biden in 2023 named Kugler to the position, succeeding Lael Brainard, who moved over to the White House to serve as a senior economic advisor. Kugler served less than two years of Brainard’s unexpired term and left with only about six months remaining, accounting for the couple of months it will take for her replacement to be confirmed.

Taking into account the Senate calendar, the new governor would serve at best three or four months, then have to undergo yet another confirmation hearing should Trump decide to reappoint the person.

While Trump could be tempted to go the shadow-chair route — Treasury Secretary Scott Bessent in the past has advocated for that course — it might be an unappetizing choice for the nominee.

The shadow chair “is still just going to be one person among many, not enjoying the powers of the office of chairman,” Guha said.

For Trump, though, selecting a shadow chair would be in keeping with his affinity for conflict and making people prove themselves, Guha added.

“He likes to run things like ‘Celebrity Apprentice,’” Trump’s former reality show on NBC, Guha said. “He likes to have people trialing, dueling it out with each other. So he might be tempted with the idea of putting somebody in the seat for a…