Hearing Date Set, Market Tensions Rise
The U.S. Senate Banking Committee has announced a hearing on the morning of September 4 to review Stephen Milan's nomination, the current chairman of the White House Council of Economic Advisers, for the Federal Reserve Board. This timing is set to complete the review process just before the Fed's September rate decision meeting, meaning Milan could directly participate in this round of voting.
Market participants believe this development adds fuel to the already high expectations for a rate cut. Currently, investors are largely betting on a 25-basis point cut in September, but if Milan smoothly joins, he may guide some board members to support a more aggressive policy path.
Intense Political Struggle
Milan's nomination stems from the vacancy left by former board member Kugler's unexpected departure. Driven by the Trump administration, most Republican congress members view it as a priority, with Senate Majority Leader Thune already placing the vote on the agenda. Meanwhile, although the Democrats criticize the nomination, they are likely only able to delay the process due to their minority status.
Analysts point out that Milan's challenges come not only from partisan opposition but also from some GOP members' questions about his independence. Especially with Trump recently dismissing Cook, raising public concern about the Fed's neutrality, lawmakers may demand Milan clarify his stance on central bank independence.
Renewed Focus on Fed's Independence
Trump has repeatedly called for faster rate cuts and recently directly fired a Fed board member, sparking worries about the central bank's politicization. If Milan is appointed, he might collaborate with board members Waller and Bowman to advocate a stronger dovish stance.
Some observers worry that this move could heighten skepticism about the Fed's policy objectives, potentially putting pressure on dollar assets. Simultaneously, investors may increasingly turn their attention to gold, euros, and other safe haven or alternative assets to hedge potential risks to the dollar.
Market Bets and Data Intersect
While Milan's nomination progresses, the market is also focused on the upcoming U.S. PCE price index and non-farm payroll data, which will provide critical guidance for the Fed's September policy decisions.
If both inflation and employment show signs of slowing, coupled with Milan potentially joining the voting pool, expectations for aggressive rate cuts will further warm up. According to the latest exchange tool data, the probability of a 25-basis point rate cut in September is nearing 90%, but some institutions are starting to bet on a 50-basis point possibility.
Divergent Views from Investors and Academia
Financial market participants generally believe that if Milan is approved before September, it would artificially amplify the risk of a rate cut. Some investment banks are already positioning for long-term U.S. treasuries and dollar short positions, betting a policy shift will lower yields and weaken the dollar.
Meanwhile, academia worries that the independence of Fed board members might be eroded, potentially harming the credibility of long-term policies. An economics professor bluntly stated: "If the market believes interest rate decisions are entirely driven by political forces, the credibility the Fed has built over decades will be tested."
Conclusion
With Milan's hearing date set, market expectations for the Fed's rate decision in September are quickly heating up. Whether he passes smoothly or not, the nomination itself has already become an important factor influencing market sentiment. In the coming weeks, the U.S. inflation and employment data, coupled with the Senate's voting process, will jointly determine the Fed's next policy direction and significantly impact the dollar and the global financial market landscape.
