Washington (AP) –
President Donald Trump says he fired Federal Reserve Gov. Lisa Cook late Monday.
In a letter posted on his Truth Social Platform on Monday, Trump said he was firing Cook for allegations that she committed mortgage fraud. The allegations were made last week by Bill Prute, Trump appointee of the Federal Housing Administration, the agency that regulates mortgage giants Fannie May and Freddie Mac.
Cook Previously, she said she would never leave her post.
Federal Reserve Chair Jerome Powell and Governor’s Committee member Lisa Cook will listen during the public meeting of the Federal Reserve Committee in Washington on June 25, 2025. (AP Photo/Mark Schiefelbein, file)
I have Trump I attacked repeatedly Federal Reserve Chairman Jerome Powell has even threatened to fire him without cutting short-term interest rates. Powell, Someone who speaks on Friday At the Economic Symposium in Jackson Hole, Wyoming, the Fed says he wants to see how the economy reacts to Trump’s import duties.
Powell’s attention infuriated Trump. Trump has called for the Federal Reserve cuts to cut the rates the federal government pays on debt. Trump has also accused Powell of mismanagement of the US Central Bank’s $2.5 billion building renovation project.
Fire the Fed’s chair or kick the governor out threatens the Fed’s respected independence. Here’s what you need to know about the Fed:
Why the Fed’s independence is important
The Fed is wielding widespread power over the US economy. By reducing short-term interest rates, it controls – it usually does When the economy is declining – The Fed can make borrowing cheaper, drive more spending, accelerate growth and hire. If we cool the economy and increase the rates we do to combat inflation, it can weaken the economy and cause unemployment.
Economists have long preferred independent central banks because they can take more easily unpopular measures to combat inflation, such as raising interest rates.
The importance of an independent Fed has solidified after most economists Extended inflation spike The 1970s to the early 1980s. Former Fed Chairman Arthur Burns has been widely accused of allowing painful inflation of that era to accelerate by succumbing to pressure from President Richard Nixon, leading to the 1972 election. Nixon feared that higher fees would cost him the election, and he won on a landslide.
Paul Volker was eventually appointed chairman of the Fed by President Jimmy Carter in 1979, who pushed the Fed’s short-term rate to an astonishingly high level of 20%. (Currently at 4.3%). Amazing rate It caused a sharp recessionsurged widespread protests by nearly 11%.
However, Volker was unflinching. By the mid-1980s, inflation had returned to the low single digits. Volcker’s willingness to inflict pain on the economy is considered by most economists as an important example of the value of the independent Fed.
Investors often look
Efforts to fire Powell will almost certainly bring stock prices down, bond yields higher, boost interest rates on government debt, and increase borrowing costs for mortgages, car loans and credit card debt. The 2010 Ministry of Finance’s interest rate is a benchmark for mortgage rates.
Most investors prefer an independent Fed, typically because their decisions are more predictable, without the influence of politics, and therefore they generally prefer an independent Fed to better manage inflation. Fed officials often publicly discuss how interest rate policies will be changed if the economic situation changes.
If the Fed is more shaking by politics, it will be difficult for financial markets to predict or understand their decision.
Fed independence does not mean it cannot be explained
A breeding chair like Powell must be appointed by the president to serve a four-year term and confirmed by the Senate. The President may also appoint six other members of the Federal Reserve Management Board and serve up a staggered condition of up to 14 years.
These appointments allow the president to make significant changes to the Fed’s policies over time. Former President Joe Biden has appointed four of his current seven members, Powell, Cook, Phillip Jefferson and Michael Barr. Adriana Kugler, the fifth Biden appointee; I resigned unexpectedly On August 1st, about five months before her term ended. I have Trump Already nominated His top economist, Stephen Milan, requires Senate approval, but as a potential replacement. Cook’s term ends in 2038, so by kicking her out, Trump can appoint loyalty sooner.
President Donald Trump will visit the Federal Reserve on July 24, 2025 during renovations in Washington. (AP Photo/Julia Demarie Nikinson)
Trump could replace Powell with the Fed chair in May 2026, when Powell’s term expired. But even swapping chairs doesn’t guarantee that Fed policies will change the way Trump wants, as the Fed’s interest rate setting committee members vote on whether to raise interest rates or lower rates.
Meanwhile, Congress can set Fed goals through law. For example, in 1977, Congress gave the Fed a “double mission” to stabilize prices and seek maximum employment. The Fed defines a stable price as 2% inflation.
The 1977 law requires the Fed speaker to testify twice annually about economic and interest rate policies before the House and Senate.
Will the President be able to do Firefighters Powell before his term ends?
The Supreme Court earlier this year in a ruling on other independent bodies suggested that the president could not fire the Fed’s chairman just because he disliked the chairman’s policy choices. But he may be able to eliminate him “for a cause.” It is usually interpreted as meaning some kind of injustice or negligence.
That’s why the Trump administration has gone to zero for renovations to the building, and hopes that it can provide an excuse “for the cause.” Still, Powell will likely fight an attempt to eliminate him, and the case could end up in the Supreme Court.
