Dive Brief:

• Council of Economic Advisers Chair Stephen Miran came under fire Thursday at a Senate hearing over concerns that he would do the bidding of President Donald Trump and impair Federal Reserve independence if he wins confirmation as a Fed governor.
• Miran told the Senate Banking Committee that he would take a leave of absence from the White House to serve a four-month stint at the central bank. His comment prompted Democratic senators to express doubt that he would jeopardize his return to the Trump administration by defying Trump’s monetary policy preferences.
• Miran repeatedly pushed back against suggestions that he would cast policy votes tainted by politics. “Independence of monetary policy is a critical element for its success,” he said, referring to the Fed. “I intend to preserve that independence,” he said. 

Dive Insight:

Trump in recent months has said that the current federal funds rate — now at a range between 4.25% and 4.5% — is inhibiting economic growth and holding the cost of servicing the federal debt unnecessarily high.

The president has repeatedly called on Fed Chair Jerome Powell to cut interest rates. Trump has also labeled Powell as incompetent and “too late” in altering monetary policy, launching some of the harshest verbal attacks ever by a president against the head of the U.S. central bank.

Trump in recent weeks has called on Fed Governor Lisa Cook to resign, alleging that she made false statements in two mortgage applications. She has refused to step down and sued to prevent her removal.

In an unusual sign of division among policymakers, two Fed governors appointed by Trump dissented in July against a central bank decision to keep the federal funds rate unchanged, saying lower borrowing costs are essential for bolstering a weakening labor market. It was the first dissent by two Fed governors since 1993.

Powell and other policymakers say that, before trimming the main interest rate, they want to ensure Trump administration tariffs do not fuel inflation, which persists nearly a full percentage point above the central bank’s 2% long-run target.

If confirmed as governor by the Senate, Miran would serve the remainder of a term that expires in January before, as he indicated on Thursday, returning to his current role as top economic adviser to Trump.

Neither Republican nor Democratic senators asked Miran about the current level of the benchmark interest rate, focusing instead on his commitment to Fed independence.

While at the Fed “you could very well be continuing to act in a way that is in the political interests of the president, because you know he is going to be your future boss again at the White House,” Sen. Andy Kim, D-N.J., told Miran.

Sen. Elizabeth Warren, D-Mass., said she expects that Miran would serve as Trump’s “puppet.”

“You have made clear that you will do or say whatever Donald Trump wants you to do or say,” Warren told Miran. “That may work in a political position, but it takes an ax to Fed independence, and will make life far more expensive for American families.”

Some Republican lawmakers, while not criticizing Trump’s efforts to influence the Fed, made it clear they favor keeping the central bank insulated from political interference.

“Are you Donald Trump's puppet?” Sen. John Kennedy, R-La., asked Miran.

“Not at all,” Miran said. “I'm very independently minded, as shown by my willingness to stray from consensus, and have out-of-consensus views, and I believe that I will continue to be as independent in my thinking process if confirmed.”

“We’re going to hold you to that governor — future governor,” Kennedy said. “You’ve got to call them like you see them.”