Trump’s Push to Remove Fed Governor Threatens Central Bank Independence

The Trump administration’s attempt to remove Federal Reserve Governor Lisa Cook has ignited a fierce debate over the central bank’s independence. On 25 August 2025, President Trump announced his intent to fire Cook, citing allegations of mortgage fraud from 2021, before her Fed tenure began in 2022. A federal judge, Jia Cobb, ruled on 9 September 2025 that the removal was illegal, reinstating Cook, as the Federal Reserve Act requires “for cause” dismissals tied to misconduct during office. “The Trump administration has asked an appeals court to remove Lisa Cook from the Federal Reserve’s board of governors by Monday, before the central bank’s next vote on interest rates,” highlighting the urgency to influence the Fed’s policy direction. This unprecedented move could reshape monetary policy, with significant implications for global markets.

The timing of the administration’s emergency appeal, just days before the Fed’s 16–17 September meeting, underscores its aim to alter the board’s composition. The Fed is poised to cut its benchmark rate by a quarter-point to approximately 4.1%, a move expected to lower borrowing costs for mortgages, auto loans, and businesses. “The Fed is expected to cut its benchmark interest rate next week by a quarter-point,” but Trump’s nominee, Stephen Miran, could advocate for a half-point cut if confirmed, potentially amplifying market reactions. The administration argues that Cook’s alleged fraud “indisputably calls into question Cook’s trustworthiness,” yet the lack of formal charges and the timing of the allegations suggest a pretext to install loyalists. Investors are closely watching, as a loss of Fed credibility could increase U.S. borrowing costs, impacting global asset pricing.

The legal battle, likely headed to the Supreme Court, could define the Fed’s autonomy for decades. Cook’s lawsuit contends that her removal violates due process and the Federal Reserve Act, which protects governors from arbitrary dismissal. “The request represents an extraordinary effort by the White House to shape the board,” raising fears of politicisation that could destabilise economic policy. While Trump’s appointees, Christopher Waller and Michelle Bowman, may support a larger rate cut, regional bank presidents’ concerns about inflation could temper such moves. The dispute has already prompted market caution, with long-term U.S. government bonds selling off due to fears over Fed independence. As the appeals court weighs the case, the outcome will influence investor confidence, U.S. equity indices like the S&P 500, and global monetary policy dynamics.