The decision for Trump to personally preside over the swearing-in ceremony of new Federal Reserve Chair Walsh, a departure from recent tradition, has once again brought the 70-year power struggle between the White House and the Fed into sharp focus. History shows that every Fed Chair has had to navigate the balance between political pressure and policy independence, and Walsh will be no exception—though his situation may be more complex than many realize.
According to reports citing White House officials, Trump will preside over Walsh's swearing-in ceremony at the White House this Friday. This move breaks with recent practice, where such ceremonies are typically held internally at the Fed, with the President rarely in attendance. The last time a Fed Chair was sworn in at the White House was nearly forty years ago, in 1987, for Alan Greenspan.
A research report from Caitong Securities' fixed income team (Sun Binbin, Sui Xiuping, Lu Xingchen) notes that while Walsh is not considered a "dovish chair," it is not certain that there will be no rate cuts this year—the relationship between a Fed Chair and the President is not static but evolves over time.
However, Walsh is not inheriting a Fed that is fully aligned. At the late April FOMC meeting, three governors—Hammack of Cleveland, Kashkari of Minneapolis, and Logan of Dallas—cast the most unusual dissenting votes since October 1992. They did not object to the idea of rate cuts per se but argued that even hinting at them was premature. This means Walsh is stepping into a central bank already showing internal fractures, even as Trump's expectation for him centers on lowering rates.
**White House Swearing-In: A Politically Charged Arrangement**
The arrangement of the ceremony itself sends a strong signal. When Powell was sworn in in 2018, the ceremony was held at the Fed, and Trump did not attend. The last sitting president to attend a swearing-in was George W. Bush, who presided over Ben Bernanke's ceremony in 2006. Trump's personal involvement this time directly underscores his close attention to this Fed appointment.
Procedurally, this transition has also been unusually prolonged. Walsh was confirmed by the Senate last week for a four-year term. Powell's term as Chair ended last weekend, but he has stated he will remain on the Fed's Board of Governors, a term extending to January 2028. Walsh also agreed to divest certain personal investments before formally taking office, which has somewhat delayed the process. During the transition, Fed Vice Chair Philip Jefferson represented the central bank at the G7 finance ministers and central bank governors meeting in Paris this Monday.
**70 Years of Dynamics: From Martin to Powell**
The Caitong Securities report systematically reviews the history of relations between Fed Chairs and Presidents since 1960, tracing a clear evolutionary path.
William Martin, lacking strong institutional defenses, had to rely on personal credibility to guard the Fed's independence. Upon taking office, he refused to act as an agent for the Treasury, shifted the Fed's decision-making center from New York to Washington, and expanded the authority to the entire FOMC. Truman, upon seeing him on a New York street, reportedly called him a "traitor" and walked away.
Arthur Burns's failure stemmed from his own disbelief that monetary policy could end inflation, which opened the door to political pressure from Nixon. Nixon applied pressure through private letters, intervened in board appointments, and even sent senior advisors to directly lecture Fed staff. Burns preserved the formal independence of the institution but made significant substantive compromises on policy direction, ultimately undermining the Fed's credibility.
G. William Miller represented the most direct model of political alignment—deliberately chosen to align with Carter's political goals, only to be consumed by external crises. By the summer of 1979, inflation had become Carter's biggest political crisis, and Miller was moved to Treasury Secretary, clearing the way for the appointment of a true inflation hawk.
Paul Volcker elevated independence from a reliance on "personal credibility" to a triple defense of "personal credibility + institutional framework + market credibility." Carter, knowing the political cost, still chose to appoint Volcker—as his policy advisor Eizenstat noted, this move "eventually squeezed inflation out at the cost of high unemployment and also squeezed him out of a second term." Though Reagan issued a pre-1984 election "order" not to raise rates and later attempted an "FOMC ambush" in 1986 via an appointed governor, neither succeeded in materially altering the policy course.
Alan Greenspan used technocratic language to push the struggle beneath the surface, clashing fiercely with George H.W. Bush, reaching a "Washington peace" with Clinton, but crossing a line under George W. Bush by actively supporting tax cuts—the first time a Fed Chair proactively "invaded" fiscal policy territory.
Ben Bernanke exemplified a model of natural convergence between the White House and the Fed during a crisis, with his main pressures coming from Congress and within the Fed, not the White House. Janet Yellen used "apolitical language + strict self-restraint" to handle Trump's attacks, becoming the first Fed Chair replaced by a new President since Carter declined to reappoint Burns.
Jerome Powell faced the most severe presidential pressure since Burns. During Trump's first term, under combined external political pressure and internal economic assessment, Powell cut rates three times in 2019 and halted balance sheet reduction. In the second term, facing Trump's tactics—including launching an investigation over cost overruns in the Fed's headquarters renovation and hinting at dismissal—Powell's response hardened significantly, elevating the defense of Fed independence to a new historical level of legal, written, and public formalization. In his final meeting as Chair, the FOMC held rates steady with an unusual 8-4 split.
**Walsh's Dilemma: A New Chair Facing Pressure from All Sides**
Walsh inherits a historically rare situation—simultaneously facing pressure from the White House to cut rates and resistance from hawkish voices within the FOMC.
Walsh is not a traditional dove. Appointed by George W. Bush in 2006 at age 35 as a Fed Governor, he was one of the youngest in the Fed's history. After the formal launch of QE2 in 2010, he became the only FOMC member to publicly question the expansionary direction, resigning early in 2011—widely interpreted by markets as a silent protest against excessive Fed easing. His background as a Morgan Stanley investment banker, former Executive Secretary of the White House National Economic Council, and close ties to Republican core circles suggest his commitment to policy independence may be no less than that of historically similar chairs.
The Caitong Securities report distills four key points from Walsh's recent speeches and Q&A sessions:
First, his definition of Fed independence is more nuanced than his predecessors', arguing that politicians commenting on monetary policy does not itself undermine Fed independence. This serves both to desensitize the institution to Trump's pressure and to preserve space for maintaining policy independence without public confrontation.
Second, he holds a negative view of forward guidance, suggesting markets may need to adapt to a more "silent" Fed.
Third, he places significant emphasis on inflation, directly contradicting Trump's view that rising oil prices represent "fake inflation."
Fourth, he believes productivity gains from artificial intelligence could make rate cuts possible, a logical structure similar to Greenspan's insight into the productivity boom of the late 1990s.
**Rate Cuts and Balance Sheet Reduction: Direction Clear, Pace Cautious**
Caitong Securities believes monetary policy under Walsh will likely be characterized by a "clear direction but cautious pace."
Regarding the pace of rate cuts, with inflation having exceeded the target for five consecutive years, stabilizing inflation expectations is a higher priority. Walsh's emphasis on inflation, particularly his rejection of the "fake inflation" theory, indicates he is unlikely to cut rates easily before inflation clearly retreats to the target range. In the short term, demand growth from data center investments may further offset room for cuts, potentially slowing the pace as it remains data-dependent. The report notes that if Trump shows Walsh more respect, cuts could come earlier; if Trump maintains high-intensity pressure, Walsh might lean toward later cuts to defend Fed independence.
Regarding the pace of balance sheet reduction (quantitative tightening, QT), Walsh believes an expanded balance sheet effectively extends the Fed's monetary policy boundary into fiscal territory, making reduction logically necessary. However, he also acknowledges that it took 18 years for the Fed to accumulate the balance sheet to its current size, and unwinding it will not happen overnight; it is expected to proceed slowly and methodically. Furthermore, initiating QT without having cut rates first could almost be seen as proactively picking a fight with the White House—this also dictates that QT will proceed at a pace designed to avoid direct confrontation before a rate-cutting cycle begins.
Caitong Securities' core conclusion is that replicating a Greenspan-style management approach and returning to a scarce reserves regime first requires winning support within the Fed itself; moving too hastily would be counterproductive. Judging Walsh's future policy path should not rely solely on his personal stance or his current relationship with the White House but should return to macro trends—the position of inflation, the resilience of growth, the direction of oil prices, the tightness of financial conditions—to deduce his most likely choices under different scenarios.
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