Charlie Jamieson, Chief Investment Officer

The latest US employment report has sent tremors through financial markets and political circles alike, but not for the usual reasons.

While the US Bureau of Labor Statistics (BLS) routinely revises its data, this month’s downward adjustment to the three-month average became a flashpoint when US President Donald Trump abruptly fired BLS commissioner Erika McEntarfer, alleging, without evidence, that the figures were manipulated for “political purposes”.

The backlash was swift and fierce. Former BLS head Robert Reich labelled the move “treasonous”, underscoring the gravity of undermining a statistical institution long regarded as apolitical and sacrosanct.

Yet the implications of this episode extend far beyond the BLS. They strike at the heart of the US Federal Reserve’s independence and foreshadow a potential structural overhaul of the central bank itself.

Ironically, the revised jobs data may offer Trump the monetary easing he has long demanded. Softer employment figures could embolden dovish voices within the Federal Open Market Committee (FOMC), potentially justifying interest rate cuts that Trump has been urging since January.

But the real story lies in how the President’s actions and his latest nominee to the US Fed Board could reshape the institution’s very foundations.

Enter Stephen Miran, a former Treasury official and vocal advocate for aggressive monetary easing.

Though his confirmation may not be completed in time for the September FOMC meeting, Miran’s appointment signals a shift in the ongoing tug of war between the US Fed and the White House.

His presence on the board, even if brief (his term ends in January 2026) injects a reformist agenda into the US Fed’s deliberations, one that could redefine its relationship with the executive branch.

Miran co-authored a 2024 paper proposing sweeping changes to the US Fed’s governance model.

His concept of “monetary federalism” aims to insulate monetary policy from short-term political pressures.

Yet paradoxically, the reforms he advocates would dramatically increase presidential influence over the US Fed. These include granting the president at-will authority to dismiss board members and US Fed chairs, shifting regulatory oversight to the Treasury, and placing the US Fed’s operating budget under congressional control.

Such reforms would mark a seismic shift in the balance of power. The US Fed, traditionally shielded from political interference, could become a tool of executive policy. While Miran frames these changes as enhancing accountability, critics warn they would erode the US Fed’s independence and politicise monetary policy.

The broader context amplifies these concerns. Trump’s erratic US tariff policies, the lingering Epstein scandal, and a cabinet often accused of turning a blind eye to institutional norms have already shaken investor confidence. The sanctity of economic “truths” like employment data is under threat, and global markets are responding with heightened volatility and risk aversion.

Despite these headwinds, US assets have rallied in recent months, defying expectations of a “sell America” trade.

Equities, bonds and the dollar have all surged, buoyed by hopes of monetary easing and resilient corporate earnings. But this optimism may be fragile. With inflationary pressures expected to remain sticky due to US tariff-related cash flows, economists caution against premature pricing of further US Fed interest rate cuts.

The next employment report and inflation data will be pivotal ahead of the September meeting.

In Washington, the real battle could potentially shift from interest rates to institutional reform. While Miran’s proposals face steep hurdles, US Senate support for the US Fed remains strong, and with 60 votes needed to legislate changes, the threat is existential. However, the administration appears poised to target the US Federal Reserve Act itself, seeking permanent alterations to the US Fed’s mandate and structure.

Despite the US Fed not being blind to these risks. As a political institution, it will likely respond with strategic concessions to preserve its autonomy. This could mean a dovish tilt in policy or regulatory leniency to appease a Republican-led Congress and White House.

While dramatic changes are not imminent, the pressure is mounting, with two US governors having voted for further interest rates cuts, while July’s weaker employment report will see a further collective shift in supporting September’s interest rate cut.

For Australia, these developments warrant close attention.

The US Fed’s decisions ripple across global markets, influencing everything from commodity prices to exchange rates. More importantly, the erosion of central bank independence in the world’s largest economy sets a troubling precedent. As Canberra navigates its own economic challenges, the US experience serves as a cautionary tale about the delicate balance between politics and policy.

In the months ahead, the US Fed’s response to these pressures will be critical. Whether it bends or holds firm will shape not only America’s monetary future but also the credibility of central banking worldwide.