Will Trump's latest attack on the Fed erode central bank's independence?

President Trump declared his intention to remove Federal Reserve Governor Lisa Cook, accusing her of mortgage-related misconduct and misleading statements about her primary residence in 2021. The allegations trace to inquiries by the Federal Housing Finance Agency and claims that Cook falsified bank records to secure favourable mortgage terms before joining the Fed in 2022. Trump invoked Article II authority, questioned Cook's competence and trustworthiness as a financial regulator, and demanded resignation. The announcement unsettled markets, weakening the US dollar and long-term Treasuries, and raised concerns about increased presidential pressure on monetary policy and central bank independence.

United States President Donald Trump has said he will fire Federal Reserve Governor Lisa Cook over unproven claims of mortgage fraud, an unprecedented step which could test the boundaries of presidential power over the central bank's independence. In a letter posted on social media on Monday, Trump told Cook he has sufficient cause to remove you from your position. Trump claims that Cook misleadingly indicated that she intended to live in two homes as her primary residence in 2021.

In the letter, Trump said Cook had falsified her bank records to obtain favourable mortgage terms before joining the Fed. He accused her of deceitful and criminal conduct in a financial matter and said he did not have confidence in her integrity. At a minimum, the conduct at issue exhibits the sort of negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator, he added, claiming authority to dismiss Cook under Article 2 of the US Constitution.

Trump's letter, which has escalated his fight to control the Fed, spooked financial markets. Both the US dollar and long-dated treasuries fell on Tuesday. The president has made little secret of his desire for the US central bank to spur growth by lowering interest rates. So, why is Trump intensifying his attacks on the Fed, and how will it affect the independence of the central bank?

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