UBS: Federal Reserve Governor Kugle resigns unexpectedly, Powell's succession battle begins in advance

According to analysis by UBS economists, the unexpected resignation of Federal Reserve Governor Cogel last Friday has forced the selection process for Powell's successor to start early, and this vacancy may lead to a restructuring of the Federal Reserve leadership much earlier than expected. UBS economist Amanda Wilcox wrote in a report last Friday: "The early vacancy of Governor Cogel's position will accelerate the selection process for the next chairman." The Federal Reserve previously announced that Cogel would officially leave on August 8th. The governor, who was scheduled to serve until January 2026 after taking office in September 2023, missed the Federal Open Market Committee (FOMC) meeting last week due to personal reasons. Cogel's early resignation, less than two years into his term, comes at a critical time when the White House is finalizing its succession plan for Powell. Wilcox said: "We previously expected that after Governor Cogel's term ended, Powell's successor would first be appointed to fill his vacant seat. Then, when Powell's term as chairman ends in May 2026, the governor who replaces Cogel will be promoted to chairman." President Trump's dissatisfaction with Powell has long been public. In the context of concerns that Trump's tariff policies may trigger a new round of inflation in the Biden era, Powell has consistently resisted the government's calls for aggressive rate cuts. Trump has not only publicly criticized Powell for keeping rates at an obstructive level to economic growth, but has also privately discussed the possibility of dismissing or demoting him - an unprecedented challenge to the legal and political independence of the Federal Reserve. UBS analysis points out that since the Federal Reserve chairman must be a current governor, Cogel's early departure gives the White House the opportunity to arrange a successor for Powell before the end of his term. This helps avoid the complicated situation that may arise if Powell chooses to stay until 2028 when his governorship officially ends. "The White House can now immediately submit nominations to the board," Wilcox said, "but the successor's long-term coexistence with the current chairman may complicate policy communication and exacerbate tension within the FOMC." This tension has already begun to show - this week's FOMC meeting saw two dissenting votes, the first time two governors have voted against in the same meeting since 1993. As for potential successors to Powell, the media and policy circles have speculated on several candidates. Wilcox pointed out, "Several media outlets, including the Wall Street Journal in June, have revealed lists of candidates such as Treasury Secretary Scott Beeson, National Economic Council Director Kevin Hasset, and former governor Kevin Wash. We believe Governor Wall, one of the two dissenters this week who supported a 25 basis point rate cut, may also enter the race." Although UBS does not make predictions regarding the government's final decision, Wilcox emphasized: "We look forward to following this process, especially now that the resignation event this afternoon has significantly accelerated the timetable." Cogel's early departure has left the Federal Reserve Board with seven vacant seats, putting pressure on the White House to nominate someone who can take over as chairman in 2026.