Trump’s Firing of Fed Governor Lisa Cook Sparks Legal, Market Debate

Washington  — President Donald Trump has reignited tensions with the U.S. Federal Reserve after announcing late Monday that he would fire Board Governor Lisa Cook, a move that has unsettled economists and raised questions about the independence of America’s central bank.

Trump alleged that Cook made false statements on mortgage applications. In response, Cook said the president lacked the legal authority to remove her and vowed to challenge the decision in court. The Fed, in a statement, said it would follow any court ruling on the matter. Under current law, a Fed governor can be dismissed “for cause,” but the term is not clearly defined, setting up a likely Supreme Court battle.

Cook, the first African-American woman to serve as a Fed governor, was appointed in 2022 and reappointed in 2023 for a term running until 2038. A career economist, she previously served in academia, on the Council of Economic Advisers under President Barack Obama, and has been widely respected for her contributions to monetary policy debates.

The move is seen by analysts as part of Trump’s broader campaign to pressure the Fed into lowering interest rates. Earlier this year, he publicly criticized Fed Chair Jerome Powell and suggested replacing him. While markets expect a rate cut in September, those forecasts are driven largely by weaker job data rather than political intervention.

Financial markets had a mixed response. U.S. stocks rose on Tuesday, but the dollar weakened against a basket of currencies, while gold prices climbed as investors sought safe havens. The political standoff highlights potential long-term risks to the Fed’s independence, which has been central to managing U.S. monetary policy for more than a century.

If Trump succeeds in removing Cook, it would give him an opportunity to appoint a new governor more aligned with his push for lower borrowing costs. Economists warn such a precedent could undermine confidence in the central bank’s independence, with implications for inflation, investment, and global financial stability.