Trump Targets Cook in Bid to Block Rate Hike

Fed Governor Lisa Cook's position at the central bank has come under renewed scrutiny from President Donald Trump, raising questions about the independence of the Federal Reserve. The White House sent a letter to Cook's attorney stating that the president is 'considering' removing her due to unproven mortgage fraud allegations.

The move comes just three weeks before a critical Fed meeting on September 15-16, where every vote counts in the increasingly split committee. Futures markets see about a 75 percent chance of a quarter-point rate increase by the midterms.

Trump's effort to remove Cook is likely motivated by concerns that the Fed could raise interest rates as soon as next month, despite soft payrolls in July. The main drivers of the expected rate hike are nearly six years of above-target inflation and elevated core price rises, alongside the Iran-related energy shock of the past six months.

SGH Macro Advisors chief US economist Tim Duy stated that 'the issue of Fed independence has not yet been resolved,' suggesting that Chair Kevin Warsh is either unwilling or unable to back Trump's push for lower rates in the face of elevated inflation. This development may embolden Cook and other hawks within the committee, potentially leading to a rate hike.