{"id":12498,"date":"2025-08-27T15:30:58","date_gmt":"2025-08-27T07:30:58","guid":{"rendered":"https:\/\/tingchao.xyz\/?p=12498"},"modified":"2025-08-27T15:31:02","modified_gmt":"2025-08-27T07:31:02","slug":"trump-tampering-with-fed-independence-is-risky-for-the-economy-experts-say","status":"publish","type":"post","link":"https:\/\/tingchao.xyz\/?p=12498","title":{"rendered":"Trump tampering with Fed independence is risky for the economy, experts say"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

Economic and financial analysts are warning that President Donald Trump\u2019s attempt to fire Federal Reserve governor Lisa Cook risks undermining the central bank\u2019s independence \u2014 something that could ultimately put U.S. households\u2019 finances at risk.<\/p>\n\n\n\n

Late Monday, Trump moved to fire Cook over allegations of mortgage fraud. He cited a \u201ccriminal referral\u201d from Federal Housing Finance Agency Director William Pulte that alleged discrepancies on Cook\u2019s mortgage application documents. Cook has refused to step down, and on Tuesday, she said she was planning to file a lawsuit challenging Trump\u2019s move.<\/p>\n\n\n\n

Cook serves on the Federal Reserve\u2019s committee for setting interest rates throughout the economy. To determine where that rate should be, the committee members weigh risks to unemployment and inflation. When the job market starts to look weak, the Fed tends to lower rates. When the risk from inflation is greater, it tends to increase them. Both moves carry risks: Higher rates can stifle economic growth, while lower rates can lead to ballooning inflation.<\/p>\n\n\n\n

Trump has called for lower rates since he took office, citing a general desire to bolster economic growth while dismissing concerns about inflation. While past presidents have expressed views about monetary policy, Trump\u2019s influence attempts are largely unprecedented \u2014 no Fed member has ever been removed for cause.<\/p>\n\n\n\n

It\u2019s setting off alarm bells, not simply over disagreements about interest rate levels, but for what undue influence on the Fed could do to the economy. Academics have consistently concluded that meddling with the independence of central banks like the Federal Reserve can lead to worsening inflation, because it removes a key check on the government\u2019s tendency to borrow as much money as it can.<\/p>\n\n\n\n

“Presidential capture of the Fed would signal to decision-makers throughout the economy that interest rates will no longer be set on the basis of sound data or economic conditions \u2014 but instead on the whims of the president,” the Economic Policy Institute said in a statement.<\/p>\n\n\n\n

“Confidence that the Fed will respond wisely to future periods of macroeconomic stress \u2014 either excess inflation or unemployment \u2014 will evaporate,” it added.<\/p>\n\n\n\n

Interfering with the Fed\u2019s independence \u201cwill make markets less stable and fuel inflationary pressures \u2014 hurting working people and weakening the economy as a whole,\u201d Elizabeth Wilkins, who was chief of staff to the chair at the Federal Trade Commission under Presidents Barack Obama and Joe Biden, said in a statement.<\/p>\n\n\n\n

So far, investors are taking the Cook drama in stride. Stocks started the day lower Tuesday but eventually returned to positive territory, with the S&P 500 gaining 0.2% and the Dow Jones Industrial Average up about 44 points, or 0.1%.<\/p>\n\n\n\n

However, the yield, or return demanded by investors for lending to the government, on the 30-year Treasury note briefly climbed to August highs of about 4.9%, a sign investors are worried about longer-term inflation concerns.<\/p>\n\n\n\n

Trump administration officials have dismissed concerns about threats to the Fed\u2019s independence and doubled down on the accusations against Cook.<\/p>\n\n\n\n

So far, the committee has not budged on rates. Although its membership consists mostly of appointees named by Biden, the members historically avoid political conflicts. But by removing Cook, who was appointed by Biden in 2022, Trump would be able to appoint another voting member who sees things his way. That would still not create a majority \u2014 and analysts have noted that Cook was somewhat more inclined to lower rates.<\/p>\n\n\n\n

But the message from Trump couldn\u2019t be clearer, experts say.<\/p>\n\n\n\n

\u201cWe have to be honest that Lisa Cook was likely targeted \u2026 and then disposed of without due process,\u201d Peter Boockvar, an independent economist and market strategist and author of The Boock Report, said in a note. The goal, he said, was to \u201cremake the Fed with people who will be most inclined to cut interest rates.\u201d<\/p>\n\n\n\n

\u201cThe real question should be, did she commit mortgage fraud?\u201d Commerce Secretary Howard Lutnick said in an appearance on CNBC on Tuesday. \u201cYes or no, and if you did commit mortgage fraud, please get out of the federal government. Get out of the seat of the governor of the Federal Reserve and go away.\u201d<\/p>\n\n\n\n

A White House spokesman said Tuesday evening that Trump was exercising his authority under existing statutes to remove Fed governors for cause.<\/p>\n\n\n\n

\u201cThe President determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions,” White House Spokesman Kush Desai said. “The removal of a governor for cause improves the Federal Reserve Board\u2019s accountability and credibility for both the markets and American people.\u201d<\/p>\n\n\n\n

The dispute over Cook is likely to wind up in the Supreme Court, which recently issued a ruling that said while the president has wide latitude to control federal agencies, his ability to make personnel decisions at the Federal Reserve may be more limited.<\/p>\n\n\n\n

Some analysts believe markets are not taking the threat to the Fed\u2019s independence seriously enough. In a note to clients, George Saravelos, head of foreign exchange research at Deutsche Bank, raised the specter of \u201cfiscal dominance\u201d \u2014 in which the president has too much say over monetary policy and interest rates.<\/p>\n\n\n\n

\u201cThere is no question in our view that the Fed is now subject to intensifying fiscal dominance risks,\u201d he wrote. \u201cWhat is a bigger surprise to us is that the market is not more concerned.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Economic and financial analysts are warning that President Donald Trump\u2019s attempt to fire Federal Reserve governor Lisa Cook risks undermining the central bank\u2019s independence \u2014 something that could ultimately put U.S. households\u2019 finances at risk. Late Monday, Trump moved to fire Cook over allegations of mortgage fraud. He cited a \u201ccriminal referral\u201d from Federal Housing […]<\/p>\n","protected":false},"author":8,"featured_media":12499,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[5],"tags":[2073,1788,1724],"class_list":["post-12498","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-international","tag-fed","tag-rates","tag-trump"],"yoast_head":"\nTrump tampering with Fed independence is risky for the economy, experts say - LISTEN WORLD<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tingchao.xyz\/?p=12498\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Trump tampering with Fed independence is risky for the economy, experts say - LISTEN WORLD\" \/>\n<meta property=\"og:description\" content=\"Economic and financial analysts are warning that President Donald Trump\u2019s attempt to fire Federal Reserve governor Lisa Cook risks undermining the central bank\u2019s independence \u2014 something that could ultimately put U.S. households\u2019 finances at risk. 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