As President Donald Trump prepares to appoint a new Federal Reserve Chair to succeed Jerome Powell in the coming months, expectations of dramatically lower interest rates for agricultural and business borrowers may prove overly optimistic. Despite Trump’s well-documented preference for substantially reduced rates—having previously suggested the federal funds rate should sit between 1% and 2%—structural and institutional constraints within the Federal Reserve system present significant obstacles.
The Federal Open Market Committee (FOMC), which determines interest rate policy, comprises 12 voting members. Only six are presidential appointees subject to Senate confirmation, serving protected 14-year terms removable only ‘for cause.’ The remaining five voting members are regional Federal Reserve bank presidents selected by their respective boards, with voting privileges rotating annually among all 12 regional presidents.
Recent FOMC deliberations reveal substantial resistance to aggressive rate cuts. The December meeting saw a 9-3 vote approving merely a quarter-point reduction, with dissents coming from both directions—one member advocating for a half-point cut while two others preferred maintaining current rates. The Fed’s latest ‘dot plot’ projections indicate that 11 of 19 committee members anticipate no further cuts in the coming year, while four foresee no more than one additional reduction.
Market analysts note that current rates appear to be approaching what economists call R-star—the neutral interest rate that neither stimulates nor restrains economic growth. While estimates vary between 2% and 3%, most FOMC members project the federal funds rate will remain near or above the current 3.25%-3.5% range through 2026. Even if Trump appoints a chair sympathetic to his views, that individual would need to persuade a majority of committee members whose longer terms insulate them from presidential pressure.
Attempts to dramatically reshape the Fed’s composition through legislation or executive action could backfire, potentially spooking bond markets and driving up long-term rates precisely opposite to Trump’s objectives. Historical precedent also suggests appointed chairs may not automatically align with presidential preferences, as demonstrated by Trump’s ongoing dissatisfaction with his own appointee Jerome Powell.