Donald Trump is making a concerted effort to undermine the Federal Reserve’s independence, raising concerns among economists and policymakers alike. Yet some of his recent moves have raised eyebrows. The effort to remove Federal Reserve Governor Lisa Cook goes further than the firing of one governor. If Trump is able to pull it off, though, it will have deep and lasting implications on the entire economy and financial markets.
It shouldn’t be since the former president has appointed exactly two actual members to the Federal Reserve Board of Governors. Christopher Waller and Michelle Bowman occupy those seats today. This seven-member board – whose regulatory and enforcement influence over banks is considered extremely powerful – makes its membership critical to U.S. monetary policy. Trump’s latest moves indicate that we’re witnessing a fundamental transformation in Trump’s attitude towards the nation’s central bank. He’s been looking to shape its direction more assertively.
Trump appears motivated mainly by low interest rates. He argues these increases would both more sustainably combat the increasing federal debt burden and strengthen the housing sector. What’s more, over the years he has steadily attacked central bankers for their refusal to cut interest rates. He’s already taken it to unprecedented extremes by threatening to fire Jerome Powell, the current Chair of the Federal Reserve. This continuous campaign against Fed officials is a clear sign of his plan to remake the board to match his economic philosophy.
In an unusual step, Trump is now seeking to remove Lisa Cook from her position. That’s the concern, according to experts, that this might be part of a wider campaign to erode the Fed’s independence. Critics argue this initiative is part of a broader, more worrisome pattern that threatens the long-term independence of the institution.
“This is really a story about trying to undo what had been 90 years of Fed independence.” – Roger Ferguson
The Board of Governors regulates the financial institutions under the Fed’s purview. It serves as an important check in the reappointment of the twelve regional bank presidents. As several appointments are set to come up in 2026, Trump’s influence could shape monetary policy for years to come, particularly if Powell’s term ends in May. If Trump was successful in removing Cook and getting rid of Powell, he would have five seats on the board under his control.
The unexpected fallout from Trump’s corrosive personal behavior goes much further than a revolving door of staff departures. Critics are sounding the alarm about Trump’s possible control of the Fed. They are especially concerned that it might devolve into a simple rubber stamp for his policies.
“Because if Trump succeeds with this, then it suggests the Fed board is nothing but a rubber stamp,” said Robert Hockett, an expert on financial regulation. “It just basically tells us that any nutjob who happens to get into the White House will be setting monetary policy henceforth.”
As a result, experts such as Mohamed El-Erian, an influential economist, have warned in ominous terms about this state of affairs. He argues that the current battle between Trump and the Fed threatens to erode public faith in its independence and expertise.
“There’s never been as dire a threat to Fed independence in our entire history as a republic as there is right now thanks to what Trump is doing.” – Robert Hockett
The legal framework underpinning these efforts is the third layer of complexity. A new wave of court challenges will inevitably test what Trump’s legitimate grounds for Cook or other governors’ dismissal might be.
Columbia Law School Professor Kathryn Judge cautions that such moves could be disastrous. The institution, and ultimately the students it serves, pay a dear price as a consequence. With helpful references to her scholarly work, she expressed her concerns with the deterioration of central bank independence.
“We are on a road that is going to lead to the erosion of central bank independence,” Judge stated. “It would be incredibly costly for the long-term health of the economy for the Fed to lose the credibility that it has spent decades trying to build.”
Joseph LaVorgna, an economist, offered a different perspective on Trump’s approach. He dismissed worries about short-circuiting Fed independence, arguing that there is a need for a serious rethinking of the existing system.
“I don’t think it’s an undermining of Fed independence,” LaVorgna remarked. “I just think it’s the fact the system needs a wholesale reevaluation and President Trump just does things unconventionally.”
The implications of Trump’s moves are far-reaching. And if he’s successful in remaking the Federal Reserve, it will fundamentally alter how the United States does monetary policy. The implications of this shift could be huge for the country’s economy. The perceived independence of central banks from politicians has historically been viewed as a cornerstone of economic stability and public faith in currency.
Critics like Robert Hockett stress that any further encroachment on Fed independence would have lasting effects on how the institution operates.
“The most serious danger, I think, to people’s being able to have confidence in the Fed board is what Trump is himself doing,” Hockett noted.
As this situation unfolds, observers will closely monitor not only Trump’s attempts at reshaping the Federal Reserve but how these actions resonate within financial markets and broader economic conditions.