US President Donald Trump has announced he is firing Federal Reserve Governor Lisa Cook, a dramatic and unprecedented move that escalates his conflict with the nation’s central bank. The decision, which Mr Trump says is “effective immediately,” has sparked a legal and political firestorm, raising serious questions about the Fed’s long-standing independence.
In a letter posted on his Truth Social platform on Monday evening, Mr Trump accused Ms Cook of “deceitful and potentially criminal conduct” related to mortgage fraud allegations. The president cited a criminal referral made by Bill Pulte, a Trump appointee who directs the Federal Housing Finance Agency. Mr Pulte alleged that Ms Cook had falsely claimed two properties as her primary residence in 2021 to secure more favourable loan terms.
Ms Cook, who has not been charged with any wrongdoing, had previously stated she had “no intention of being bullied to step down.” Her lawyers have reportedly vowed to fight the firing, arguing that the president lacks the legal authority to remove her. The Federal Reserve Act stipulates that a governor can only be removed “for cause,” a provision traditionally interpreted to mean serious misconduct or neglect of duty, not policy disagreements.
The firing of Ms Cook, who was appointed by President Joe Biden and whose term was not set to expire until 2038, is being seen by many analysts as a direct attempt by Mr Trump to install political loyalists on the Fed’s powerful Board of Governors. The move comes as Mr Trump has repeatedly and publicly criticised the central bank for not cutting interest rates more aggressively.
The president has previously threatened to fire Fed Chairman Jerome Powell and has relentlessly attacked him for keeping borrowing costs steady. Mr Trump has also nominated Stephen Miran, a top economic adviser, to fill another vacant seat on the board. The two vacancies now give Mr Trump the opportunity to reshape the seven-member board and potentially influence monetary policy.
The Federal Reserve has operated independently from the White House for decades, a practice that economists and financial markets believe is crucial for long-term economic stability. The independence allows the Fed to make difficult, and sometimes unpopular, decisions—such as raising interest rates to combat inflation—without fear of political reprisal.
Experts warn that this erosion of the Fed’s autonomy could undermine confidence in the US economy and lead to higher inflation and borrowing costs in the future. The last time the Fed was widely seen as caving to political pressure was in the 1970s, a period marked by “stagflation” — high inflation and high unemployment — that took years of painful policy to reverse.
The legal battle over Ms Cook’s removal is expected to be protracted and could ultimately be decided by the Supreme Court. In the meantime, the unprecedented move has set the stage for a new and turbulent chapter in the relationship between the US government and its central bank.
