President Donald Trump’s push to remove Federal Reserve Governor Lisa Cook represents far more than a personnel change—it is a bold maneuver that could alter the very foundations of U.S. monetary policy and central bank independence.
Trump’s challenge to Fed independence
Since returning to office in January, Trump has put the Federal Reserve directly under political scrutiny. He has criticized the central bank for not cutting rates, floated the idea of firing Chair Jerome Powell, and is now attempting the unprecedented move of unseating Cook.
For Trump, the strategy is twofold: reduce borrowing costs to ease federal debt pressures and stimulate the housing market, which remains a crucial driver of economic resilience. Critics, however, warn that these steps risk politicizing the Fed, undermining its credibility, and destabilizing the U.S. financial system.
“Eroding central bank independence could have devastating long-term effects on the economy,” said Kathryn Judge, professor at Columbia Law School. “The Fed’s credibility has taken decades to build, and losing it would be incredibly costly.”
The power at stake
The seven-member Board of Governors wields significant influence over the U.S. financial system. While the Federal Open Market Committee (FOMC) sets the benchmark federal funds rate, the governors independently establish the discount rate and interest on reserve balances—tools that influence liquidity and lending. The board also oversees the reappointment of the 12 regional Fed presidents, many of whom come up for review in 2026.
Moreover, the Fed plays a vital role in maintaining the integrity of the Treasury system and preserving the stability of the U.S. dollar. These powers extend far beyond a single rate cut.
“If Trump succeeds, the Fed board risks becoming a rubber stamp,” said Robert Hockett, professor at Cornell Law School. “That would open the door to the same kind of instability we’ve seen in countries where political leaders dictate monetary policy, from hyperinflations in Latin America to the volatility in Turkey.”
Trump’s agenda
While administration officials insist they respect Fed independence, Trump has made it clear he will prioritize nominees willing to support lower interest rates. His allies argue that the Fed has strayed into areas beyond its mandate, such as climate policy and diversity initiatives, and requires a structural reset.
“There has been mission creep at the Fed,” said Joseph LaVorgna, former White House economist. “Trump’s approach may be unconventional, but a wholesale reevaluation of the central bank is overdue.”
Wall Street figures also see merit in reform. Mohamed El-Erian, Allianz chief economic advisor, has called for Powell’s resignation to avoid escalating conflicts over independence. He has also suggested adopting external voices in policymaking, similar to the Bank of England, to avoid groupthink.
The limits of trump’s influence
Despite these ambitions, Trump’s control remains uncertain. He currently has two appointees on the board, with a third awaiting Senate confirmation. Powell’s term ends in May 2026, potentially opening another vacancy. Still, assuming these governors would act as loyalists may be unrealistic.
Both Christopher Waller and Michelle Bowman, Trump’s current appointees, have demonstrated independent thinking and are unlikely to simply rubber-stamp presidential directives. Legal challenges could also limit Trump’s ability to remove existing members without cause.
Implications for markets and the dollar
If successful, Trump’s reshaping of the Fed could mark the most dramatic shift in U.S. central banking in nearly a century. Investors are already weighing the risks.
“Markets need to prepare for the very real possibility of a materially different Fed,” said Krishna Guha, head of global policy at Evercore ISI. “This doesn’t mean policy will immediately swing, but it signals a rupture with past practice that could have profound consequences.”
For critics, the risk extends beyond short-term policy.
“There has never been such a direct threat to Fed independence in U.S. history,” Hockett warned. “Long-term confidence in the Fed—and by extension, in the dollar itself—is at stake.”
