By Yu Bokun CGTN
Is this the end of the independence of the Federal Reserve?
US President Donald Trump on Monday ordered the removal of Federal Reserve Governor Lisa Cook, citing allegations of mortgage fraud. This unprecedented move marks a dramatic escalation in his ongoing battle with the central bank and has shaken confidence in the Fed’s independence.
Cook said Trump had no authority to fire her and that she would not resign. Cook’s lawyer vows to sue Trump. The Fed stated it would comply with any court ruling on whether the president has the authority to remove Cook. Trump said he is ready for a legal fight.
Cook is one of seven members of the Fed’s Board of Governors. She also sits on the 12-member Federal Open Market Committee, which sets US interest rates. Removing her could allow a replacement more aligned with Trump’s economic agenda, because the president can nominate candidates for this role, potentially favoring lower interest rates.
Former Fed Vice Chair Lael Brainard warned that any member of the board might worry they could be subject to this kind of political pressure, potentially undermining the Fed’s institutional independence.
Markets reacted quickly. The US dollar and S&P 500 futures both dropped in the hours following the announcement. Trump’s push for rate cuts is both economic and political. With tariffs pushing up prices ahead of the 2026 midterms, a looser monetary policy could help boost voter support.
Earlier this month, he also fired the Bureau Chief of Labor Statistics after weak jobs data and has repeatedly criticized Fed Chair Powell for acting “too late.” Fed independence is vital. It serves as a benchmark and a cornerstone of confidence in the US credit rating. Investors value this independence because it ensures policymakers make decisions based on economic data, not political pressures. If the Fed loses independence, the ripple effects could hit the global economy.
