In today's political and economic chessboard of the United States, Trump's series of actions targeting the Federal Reserve is drawing significant attention and deep concerns from all sectors. The comments from former Federal Reserve Vice Chair Lael Brainard have further brought this game surrounding the independence of the Federal Reserve into the spotlight.
Trump's attempt to remove Federal Reserve Governor Lisa Cook based on allegations of falsifying mortgage documents appears to be legally motivated, yet it is difficult to escape the suspicion of political manipulation. Timing-wise, this coincides with Trump's ongoing criticism of Federal Reserve Chair Jerome Powell and his colleagues for not lowering interest rates. The attack on Cook makes it hard not to associate it with his efforts to place 'insiders' within the Federal Reserve, thus gaining control over the monetary policy direction. If successful in removing Cook, Trump would have the opportunity to secure a majority position in the seven-member board, likely tipping the scales of Federal Reserve decision-making significantly in his favor.
The impact of this event goes far beyond personnel changes within the Federal Reserve. Lael Brainard pointed out that Trump's actions represent an unprecedented attack on the independence of the Federal Reserve. As the core architect of U.S. monetary policy, the independence of the Federal Reserve is crucial for maintaining economic stability and confidence in financial markets. Once the Federal Reserve's decision-making is excessively influenced by political factors, its credibility will be significantly undermined, shaking the foundation of market trust in the Federal Reserve.
Historically, the importance of central bank independence is self-evident. Before the 1980s, frequent government interventions in interest rate adjustments, often based on short-term political needs to lower rates, ultimately led to a severe stagflation crisis. Today, Powell and most Federal Reserve voting members maintain a stance of not easily lowering rates, which is a vigilance against stagflation crises. If Trump successfully alters the decision-making structure of the Federal Reserve and arbitrarily pushes for rate cuts, the U.S. economy is likely to repeat the mistakes of stagflation, facing a dilemma of stagnant economic growth alongside high inflation.
From the market's reaction, Trump's removal action against Cook has already stirred significant waves in the financial markets. Spot gold prices have surged, reaching new highs in two weeks, while the U.S. dollar index briefly retreated. This clearly indicates that investors are deeply worried about the threat to the Federal Reserve's independence, and the increase in uncertainty has quickly heightened market risk-averse sentiments.
Looking at the interest rate setting mechanism of the Federal Open Market Committee, regional Federal Reserve Presidents play a crucial role. Trump's political maneuvering makes the reevaluation of regional Federal Reserve Presidents' reappointments in February 2026 full of uncertainties, with several Presidents facing the risk of being removed. This will undoubtedly change the voting structure of the Federal Open Market Committee and subsequently influence the direction of interest rate policy. Interest rates, as the 'regulator' of the economy, any changes will have far-reaching effects on both the U.S. and global economies.
Trump's political manipulation of the Federal Reserve is a high-stakes gamble. In pursuit of his own political and economic goals, he is putting the independence of the Federal Reserve, the stability of the U.S. economy, and global financial market confidence at risk. The ultimate outcome of this game not only concerns the future of the U.S. economy but will also leave a profound mark on the global economic landscape, warranting our continued attention and reflection.