What brokers need to know about Friday's big news, and what to watch for over the next few weeks
The days following the Federal Reserve’s decision to hold rates have been filled with more criticism, and now a resignation of a Fed governor.
Adriana Kugler announced Friday she was stepping down from the central bank to return to Georgetown University in the fall as a professor. She was a member of the Federal Open Market Committee (FOMC), which was responsible for making rate decisions.
This hands President Donald Trump a FOMC board opening, which could allow him to appoint the eventual successor to Fed chair Jerome Powell, who has been the face of the monetary policy criticism from the administration.
The last couple of months have been marked by political pressure, investigations, and even threats to remove Powell over the cost of renovations at the central bank. The path forward for the central bank may be even more complicated with Kugler’s resignation.
Sam Williamson (pictured top), senior economist at First American, said it’s a challenging time at the Federal Reserve.
“The US faces its own challenges, including stickier inflation and the possibility of tariff-induced inflation reacceleration, which complicate the Fed’s path forward,” Williamson told Mortgage Professional America. “Still, the Fed has shown it’s willing to act decisively if conditions shift, as evidenced by the 50-basis-point cut last September in response to signs of labor market softening.”
Fed independence and political pressure
There has been considerable discussion about the challenges to the Federal Reserve's independence over the past few weeks, as criticism of Powell and the central bank continues to intensify. Williamson said that political pressure is nothing new, and that there are enough safeguards in place to keep the Fed from being politicized.
“Political pressure on the Fed is nothing new, and its independence has always existed within a broader political framework,” he said. “A combination of laws, norms, and institutional design grants the Fed meaningful autonomy in setting monetary policy. Governors serve staggered 14-year terms, the Fed is self-funded, and regional presidents are selected independently of the White House. These features help insulate the FOMC from short-term political influence.
“While the Fed is designed to operate independently, leadership transitions can still influence its tone and priorities. That said, the FOMC is a consensus-driven body, and any policy shifts—such as rapid rate cuts—would still require broad support.”
Williamson said he wasn’t sure what would happen to the markets if the Fed’s political independence was threatened.
“There’s little precedent for a major disruption to Fed independence, so the impact on rates is hard to predict,” Williamson said.
Economic headwinds
Williamson noted that tariff impacts are starting to show up at the consumer level.
“Tariffs are keeping Fed officials on guard, with officials thinking that they may contribute to higher inflation that would warrant maintaining a restrictive policy stance,” he said. “Higher import costs are beginning to reach consumers, adding pressure at a time when inflation remains above target. These effects may intensify as firms run through pre-tariff inventories and new rounds of tariffs take hold.”
Also, giving the Fed pause at the July meeting was the job market, which continued to show unemployment rates lower than central bank targets.
However, Friday’s jobs report may have changed things. There were only 73,000 nonfarm payroll jobs added in July, and reports from May and June were revised to show 258,000 fewer jobs added than previously reported.
Speculation about Federal Reserve Chair Jerome Powell's potential departure is sparking anticipation among mortgage professionals for a significant interest rate reduction.https://t.co/RZwKvvlzDy
— Mortgage Professional America Magazine (@MPAMagazineUS) July 24, 2025
Williamson noted that the weaker jobs report could cause a decline in interest rates before the Fed’s September meeting. This was showing up in bond yields on Friday, which plunged after the weak jobs report.
“The weakening labor market could create a scenario where mortgage rates may soften, even before the Fed’s September meeting,” Williamson said. “Markets often move ahead of policy, and rising expectations of a cut could begin to lower long-term yields. That may lead to a modest decline in mortgage rates even before the Fed acts. Combined with rising housing supply and more stable home prices, lower rates could help ease affordability pressures and support a gradual recovery in housing activity later this year.”
In the aftermath of the jobs report and Kugler’s resignation, CME FedWatch bumped the chance of a rate cut in September to 91.5%. On Thursday, the odds were just 37.7%. The chance of no cuts the rest of the year, which was 17.1% on Thursday, was down to 0.3% on Friday, with a 58.9% chance of cuts equaling 75 basis points over the rest of 2025.
Even though the jobs report boosted the chances of a rate cut, Trump fired the head of the Bureau of Labor Statistics (BLS), Dr. Erika McEntarfer, a President Biden appointee. He claimed on his Truth Social account that the jobs numbers were “rigged” to make Republicans and himself look bad.
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