President Donald Trump removed Fed Governor Lisa Cook, triggering market declines and raising doubts about the Federal Reserve's independence. Filling another vacancy would create a majority of Trump-appointed governors on the Fed board. Short-term market reactions included a dip in S&P 500 futures, a rise in the 10-year Treasury yield, and a weaker dollar. Investors fear political influence over monetary policy, which could push bond yields higher and undermine the dollar's reserve status. Cook resisted calls to resign after an administration official accused her of mortgage fraud. A legal battle over presidential removal authority appears headed toward the Supreme Court, given prior rulings on removal protections for Fed officials.
President Donald Trump's announcement Monday night that he is firing Fed Governor Lisa Cook sent markets lower as investors price in doubts about the Federal Reserve's independence, a cornerstone of U.S. financial power. Filling another vacancy would give Trump-appointed governors a majority on the Fed board. President Donald Trump escalated his ongoing fight against the Federal Reserve with an unprecedented move to fire Fed Governor Lisa Cook, putting the central bank's independence at risk and setting up a struggle that will play out in courts and financial markets.
Futures for the S&P 500 dipped 0.13%, and the 10-year Treasury yield rose 1.4% as bonds sold off. The dollar fell 0.16% against the euro and 0.29% against the yen. As investors grow concerned over the Fed making political rather than economic decisions, they will demand higher yields on bonds and further question the status of the dollar as the world's top reserve currency.
"Pursuant to my authority under Article II of the Constitution of the United States and the Federal Reserve Act of 1913, as amended, you are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately," Trump wrote in a letter posted on his Truth Social account. Since returning to the White House, he has demanded that the Fed cut rates and routinely insults Chair Jerome Powell for not doing so. After teasing that Trump would fire him, he later backed off.
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