Analysts Respond to Trump’s Dismissal of Fed Governor Cook as a Further Assault on Central Bank Independence

On Monday, U.S. President Donald Trump issued an unprecedented order removing Federal Reserve Governor Lisa Cook with immediate effect. In a letter published on his Truth Social account, Trump invoked Article II of the Constitution and the Federal Reserve Act of 1913, citing a criminal referral filed by the Federal Housing Finance Agency that accuses Cook of making false statements on mortgage documents. He characterized her conduct as “fraudulent and potentially criminal,” arguing that such behavior erodes the trust essential for those charged with crafting and supervising U.S. monetary policy.

The announcement sent ripples through global markets. The U.S. Dollar Index slid nearly 30 basis points to 98.19, while spot gold spiked over $20 to $3,378.85 per ounce. Treasury yields and S&P 500 futures likewise retreated, reflecting renewed concerns over the Fed’s autonomy and the prospect of politically driven rate cuts.

Analysts warn that Cook’s removal represents a fresh challenge to the Fed’s ability to operate free from political interference. Tony Sycamore of IG observed that relentless White House pressure on Chair Jerome Powell culminated in last week’s policy shift and now extends to the Fed’s governance, undermining confidence in its impartiality. Christopher Wong at OCBC in Singapore noted that the move could tilt the Federal Open Market Committee toward dovish policymaking, further weakening the dollar. Kyle Rodda of Capital.com argued that installing loyalists jeopardizes institutional trust and strengthens the case for safe-haven assets like gold and Bitcoin.

Charu Chanana of Saxo Bank in Singapore highlighted that, beyond boosting the odds of an earlier rate cut, Cook’s ouster casts a long shadow over central bank independence, prompting investors to hedge with the yen and gold against eroding credibility. Bart Wakabayashi of State Street in Tokyo warned that the perceived instability and loss of U.S. economic leadership risk driving capital to safer jurisdictions. Commonwealth Bank’s Carol Kong added that this action creates another opportunity for Trump to seat a more dovish voting bloc on the FOMC, exacerbating downward pressure on the dollar. Mizuho Securities’ Shoki Omori concluded that prolonged doubts about the Fed’s institutional integrity may accelerate market expectations for a September rate cut and deepen the dollar’s slide against the yen.

Should legal challenges allow Cook to remain on the Board pending review, the dispute could escalate to the Supreme Court. Conversely, if Trump’s dismissal stands, he will secure another vacancy to reshape the Fed’s decision-making body, reinforcing his broader campaign to influence U.S. monetary policy.