The independence of the Federal Reserve is being severely tested! Trump fires Powell to "shuffle the deck" on the board, and the US dollar falls in response.

President Trump fired Federal Reserve Board member Lisa Cook on Monday evening local time. This move marks a new stage in Trump's long-standing struggle to strengthen his control over the Federal Reserve, which has been traditionally viewed as independent from daily politics. Trump announced this decision, stating that he has the constitutional power to dismiss Cook. However, this move will undoubtedly raise questions about the independence of the Federal Reserve. After Trump announced the dismissal of Cook, the dollar index fell by 0.2% and the price of gold rose by 0.4%. In a letter posted on social media platforms, Trump stated that he fired Cook because she was suspected of mortgage fraud. Last week, a regulator appointed by Trump, Bill Pulte, made allegations that Cook declared two properties in Michigan and Georgia as her "primary residences" in 2021 to obtain more favorable interest rates (normally, second homes or rental properties have higher mortgage rates). Trump had urged Cook to resign last week. The Department of Justice also plans to investigate Cook for "mortgage fraud." Cook released a statement refusing to resign "under bullying." Trump's dismissal of Cook is likely to trigger a legal battle. During the trial, Cook may be allowed to continue in her position. Cook must file a lawsuit in her own name as the victim, not on behalf of the Federal Reserve. Trump has been dissatisfied with the Federal Reserve's refusal to cooperate with his efforts to lower interest rates, repeatedly criticizing Federal Reserve Chairman Powell and calling for his early resignation. Now, Trump is turning his sights on Cook. Cook had previously stated that Trump's trade policies could suppress US productivity and force the Federal Reserve to raise rates in an environment of declining efficiency to curb inflation. More importantly, Trump's actions may have far-reaching economic and political repercussions. Removing Cook from the Federal Reserve Board will provide Trump with an opportunity to appoint loyalists. Trump has said that he will only appoint officials who support rate cuts. The Federal Reserve Board is the core decision-making body of the Federal Reserve, consisting of 7 seats, all nominated by the president and approved by the Senate. Apart from Chairman Powell, Vice Chairman Michelle Bowman and Board Member Christopher Waller, who are responsible for supervisory affairs at the Federal Reserve, were nominated by Trump in his first term. The remaining 4 members were nominated by former President Biden. Adrienne Koogle had resigned from the Federal Reserve Board earlier this month. Trump then announced the nomination of White House Economic Advisor Council Chairman Stephen Milan to fill this vacancy. Strategist Rodrigo Catril of the National Australia Bank stated, "Firing Cook exacerbates concerns about the damage to the independence of the Federal Reserve, assuming she has no legal recourse." "If Trump succeeds, this means that there may be four Federal Reserve Board members who align with Trump's position. Whether these members will respect the independence of the Federal Reserve and uphold its dual mandate remains to be seen."