Democratic Control Narrows Trump’s Room to Reshape the Fed

Democrats’ victory in both chambers of Congress has narrowed President Donald Trump’s room to reshape the Federal Reserve, while markets weigh another rate increase in December.

Fed governor nominees require Senate confirmation, placing a hurdle in the path of efforts to alter the board’s composition. Trump appointed Fed Chair Warsh in May, and Warsh’s chair term runs through 2030, beyond Trump’s current presidential term.

The Fed raised rates by 25 basis points in September, its first increase in three years, with inflation above its 2% target. It held rates in October, but Warsh’s remarks after the meeting reinforced market expectations for a December increase.

PGIM Chief Global Economist Dalip Singh expects the Fed could raise rates by a cumulative 100 basis points over the coming year. Some analysts say that if Trump changes his Iran policy or drops plans for additional tariffs, easing inflation pressure could mean the Fed may not need to expand its tightening.

Sen. Elizabeth Warren is expected to lead the Senate Banking Committee, where Warsh’s policy positions and disclosures may face closer scrutiny.