Could Kugler’s Successor Become the Next Fed Chair?

In recent months, U.S. President Donald Trump has repeatedly criticized Fed Chair Jerome Powell for "cutting rates too slowly" and hinted multiple times that he would soon announce his pick for the next Fed chair. Speculation has been rife about who will take the helm of the central bank.

Now, with Fed Governor Adriana Kugler unexpectedly announcing her early resignation, the focus has shifted to who will fill her vacant seat on the Board of Governors. The reason? Kugler’s successor could very well become the next Fed chair.

Last Friday, Kugler announced she would formally step down on August 8. Recently, she had advocated keeping key interest rates unchanged "for some time" and missed last week’s FOMC meeting due to personal reasons.

Kugler’s term as governor was originally set to end on January 31, 2026, but her early departure gives Trump an opportunity to install a "shadow chair" into the Fed Board sooner.

On August 3, Trump said he would nominate a new Fed governor in the coming days.

In a recent report, UBS noted that Kugler’s surprise resignation has forced an early start to the search for Powell’s successor. The White House’s nominee to replace Kugler could ultimately become the next Fed chair.

However, the bank also pointed out that others, such as current Fed Governor Christopher Waller, could still be in the running.

UBS economists, including Amanda Wilcox, outlined a possible path: Powell’s successor would first be appointed to fill Kugler’s seat and then potentially be elevated to Fed chair when Powell’s term ends in May next year.

"Kugler’s seat opening up earlier than expected will accelerate the search for the next chair," Wilcox wrote.

UBS believes that since the Fed chair must be a sitting governor, having Trump’s preferred successor fill Kugler’s seat could help avoid complications if Powell chooses to remain on the Board until 2028.

Although Powell’s term as chair ends next year, he could opt to stay on as a governor until 2028. Traditionally, Fed chairs resign from the Board when their term ends, but Powell has repeatedly refused to say whether he will step down as governor.

Under the Federal Reserve Act, the Fed chair is nominated by the president and must be selected from the Board of Governors, with Senate confirmation required. If a U.S. president wants someone to serve as Fed chair, they typically need to first appoint them as a governor.

The Fed’s monetary policy decisions are made by the Federal Open Market Committee (FOMC), which consists of 12 members: the seven Fed governors, the president of the New York Fed, and four rotating regional Fed presidents. The Federal Reserve Act stipulates that governors serve 14-year terms, cannot be reappointed, and one governor is replaced every two years.

Before Powell’s term ends, no other governors’ terms will expire aside from Kugler’s. If Powell chooses to stay on the Board after his chair term ends, the White House’s options for nominating a new chair would be limited to existing Board members. This means that installing Powell’s successor now would be a safer move to avoid such constraints.