Will Wozh compromise with Trump? An article reviewing 70 years of covert power struggles between the President and the Federal Reserve

By: Zhao Ying

Source: Wall Street Insights

Trump will personally preside over the swearing-in ceremony of the newly appointed Federal Reserve Chair, Worsh. This move, which breaks with recent convention, once again brings the 70-year power struggle between the White House and the Federal Reserve into the spotlight. History shows that every Federal Reserve chair seeks to balance political pressure with policy independence, and Worsh is no exception—but the situation he faces is far more complicated than outsiders may think.

According to the Wall Street Journal, citing White House officials, Trump will personally host Worsh’s swearing-in ceremony at the White House this Friday. This breaks with the convention of recent years—swearing-in ceremonies typically take place within the Federal Reserve, and the president rarely attends. The last time a Federal Reserve chair’s swearing-in ceremony was held at the White House dates back to 1987, when Alan Greenspan was sworn in; nearly four decades have passed since then.

In its latest research report, the Caitong Securities fixed-income team (Sun Binbin, Sui Xiuping, Lu Xingchen) points out that although Worsh is not a “dovish chair,” it is still not certain that there will be no rate cuts this year—because the relationship between the Fed chair and the U.S. president is not static, but changes with circumstances.

However, Worsh did not take over a fully ready-to-go Federal Reserve. At the late-April FOMC meeting, three regional Fed governors—Hammack of Cleveland, Kashkari of Minneapolis, and Logan of Dallas—cast the most unusual dissenting votes since October 1992. What they opposed was not rate cuts themselves, but the view that even hints of rate cuts should not exist. This means Worsh inherits a central bank with visible cracks within it, and what Trump expects of him is precisely rate cuts.

White House swearing-in ceremony: An arrangement packed with political signals

The arrangement itself already releases strong signals. When Powell was sworn in in 2018, the ceremony was held inside the Federal Reserve, and Trump did not attend. The most recent sitting president to personally attend a swearing-in ceremony was George W. Bush, who attended Ben Bernanke’s swearing-in in 2006. With Trump personally presiding now, he has directly underscored his close attention to this Fed chair appointment.

On the procedural level, the handover process is also unusually lengthy. Worsh was confirmed by the Senate last week and given a four-year term. Powell’s term as chair expired over the weekend, but he said he would remain on the Fed’s Board of Governors as a governor, with that term extending to January 2028. Worsh had also previously agreed to divest part of his personal investments before officially taking office, which delayed the handover process to some extent. During the transition period, the Fed’s Vice Chair, Philip Jefferson, represented the central bank at the G7 finance ministers and central bank governors meeting held in Paris this Monday.

A 70-year history of power struggles: From Martin to Powell

Caitong Securities’ report systemically reviews the relationship history between successive Federal Reserve chairs and presidents since 1960, outlining a clear line of evolution.

When institutional safeguards were absent, William Martin could only rely on personal credibility to maintain independence. After taking office, he refused to act as a proxy for the Treasury, shifted the decision-making center from New York to Washington, and expanded decision-making authority to the entire FOMC. When Truman met him on the streets of New York, he merely left him with the line “Traitor” and walked away.

Arthur Burns’s failure stemmed from his own disbelief that monetary policy could end inflation, which opened the door for Nixon’s political pressure. Nixon put pressure through private letters, intervened in the composition of the board’s personnel, and even sent senior advisers to directly reprimand Federal Reserve staff. Burns preserved institutional independence in form, but made major compromises in the substantive direction of policy, ultimately destroying the Fed’s credibility.

William Miller reflected the most direct model of political coordination—deliberately selected to align with Carter’s political goals, only to backfire when faced with external crises. In the summer of 1979, inflation had become Carter’s biggest political crisis, and Miller was transferred to become Secretary of the Treasury, creating a place for the nomination of a true inflation hawk.

Paul Volcker upgraded independence from “guarding personal credibility” to a triple moat of “personal credibility + an institutional framework + market credibility.” Carter knew that appointing Volcker would come with a political price, yet still made the choice—just as his policy adviser, Eisenstat, said, this “ultimately squeezed inflation out at the expense of high unemployment, while also pushing him out of a second term.” Although Reagan issued a “command” before the 1984 election telling Volcker not to raise interest rates, and in 1986 the appointed governors launched an “FOMC ambush,” neither ultimately managed to change the policy direction in any substantive way.

Using technical bureaucratic rhetoric, Alan Greenspan kept the struggle below the surface. He clashed fiercely with George H. W. Bush and reached “a Washington-style peace” with Clinton, but during George W. Bush’s tenure, he overstepped by supporting tax cuts, becoming the first Fed chair in history to actively “intrude” into the fiscal policy domain.

What Ben Bernanke reflects is the pattern of natural convergence between the White House and the Fed under crisis conditions, with pressure mainly coming from Congress and within the Fed rather than from the White House. Janet Yellen responded to Trump’s attacks with “non-political language + strict self-restraint,” becoming the first Fed chair to be replaced by a newly elected president since Carter chose not to renominate Bernanke.

The presidential pressure facing Jerome Powell is the most severe since Bernanke. During Trump’s first term, under the combined effect of external political pressure and internal economic judgments, Powell cut rates three consecutive times in 2019 and stopped balance sheet reduction. In his second term, facing investigations and hints of dismissal initiated by Trump on the grounds of cost overruns in renovations to the Federal Reserve’s Washington headquarters, Powell’s response hardened significantly, elevating defense of the Fed’s independence to a new historical high in terms of legal grounding, written documentation, and public visibility. In his final meeting as chair, the FOMC kept rates unchanged with a rare 8-to-4 split.

Worsh’s predicament: A new chair caught in difficulties both within and outside

The situation Worsh takes over is quite rare in history—he faces not only rate-cut pressure from the White House, but also hawkish resistance from within the FOMC.

Worsh is not a dovish chair in the traditional sense. In 2006, at age 35, he was appointed as a Federal Reserve governor by George W. Bush—one of the youngest governors in Fed history. After QE2 officially began in 2010, he became the only governor within the FOMC who openly questioned the expansionary direction, and in 2011 he resigned early. The market widely interpreted this as a silent protest against excessive easing. With a background from the Morgan Stanley investment bank, executive secretary experience at the White House NEC, and close ties to the core circles of the Republican Party, expectations for his policy independence are not lower than those of past chairs with similar backgrounds.

Caitong Securities’ report outlines four key points from Worsh’s recent speeches and Q&A sessions with reporters:

First, his definition of Fed independence is more nuanced than that of his predecessor. He believes that politicians meddling in monetary policy does not affect the Fed’s independence. This both desensitizes pressure from Trump and leaves room to maintain policy independence without openly clashing in the future.

Second, he holds a negative view of forward guidance, suggesting that markets may need to adapt to a more “silent” Federal Reserve.

Third, he places great emphasis on inflation, directly denying Trump’s view that rising oil prices are “false inflation.”

Fourth, he argues that productivity improvements brought by artificial intelligence will make rate cuts possible, which follows a similar logical structure to Greenspan’s late-1990s insights about a productivity boom.

Rate cuts and balance sheet reduction: The direction is clear, but the pace will be cautious

Caitong Securities believes that after Worsh takes office, monetary policy will likely exhibit the characteristics of “a clear direction but cautious steps.”

On the cadence of rate cuts, inflation has been above the target for five consecutive years, making stabilizing inflation a higher priority. Worsh’s strong focus on inflation—especially his denial of the “false inflation” theory—indicates that he will not easily cut rates before inflation clearly falls back to the target range. In the near term, demand growth driven by investment in data centers may further offset the room for rate cuts, causing the timing of rate cuts to slow due to data constraints. The report notes that if Trump shows Worsh more respect, rate cuts could come earlier; if Trump continues to apply intense pressure, Worsh may in fact lean toward cutting rates later to defend Fed independence.

On the cadence of balance sheet reduction, Worsh believes that the expanded balance sheet in fact extends the Fed’s monetary policy boundaries into the fiscal realm, making balance sheet reduction necessary in logic. But he also acknowledges that it took the Fed 18 years to accumulate the balance sheet to such a level, so shrinking it is not something that can be done overnight; it is expected to proceed slowly and in an orderly manner. Moreover, starting balance sheet reduction without a rate cut backdrop can almost be seen as proactively provoking a conflict with the White House—this also determines that balance sheet reduction will be carried out in a pace designed to avoid direct confrontation before a rate-cut cycle begins.

Caitong Securities’ core conclusion is that reproducing Greenspan-style management and returning to a model of scarce reserves first requires winning support within the Fed. Moving too quickly will only backfire. When judging Worsh’s likely future policy path, you should not only look at his personal stance or his current relationship with the White House; instead, you should return to the big-picture macro trends—its starting point on inflation, growth resilience, the direction of oil prices, and how loose or tight financial conditions are—to infer the most likely choices he will make under different scenarios.