Is the Fed losing its independence under pressure from Trump?

As if the world didn't have enough problems already — wars in Eastern Europe and the Middle East, trade conflicts flaring up again, global inflation still present — Donald Trump has intensified his attacks on the Fed, demanding faster and deeper rate cuts. And it seems that his insistence may be paying off.

To be clear, the Fed has not rushed to call an emergency meeting or promised a drastic 200-300 basis point cut, as the president desires. Instead, at the recent Jackson Hole symposium, Fed Chairman Jerome Powell hinted that if the U.S. labor market continues to weaken [https://www.cnbc.com/2025/08/01/us-job-market-jobs-report-july-2025.html], the central bank is prepared to lower interest rates.

That was enough to send the markets into a frenzy. According to the CME FedWatch tool, traders now see an 85% chance of a rate cut at the September 17 meeting. No wonder, though, the S&P 500 [https://www.barchart.com/stocks/quotes/$SPX], Nasdaq [https://www.barchart.com/stocks/quotes/$IUXX], and Dow Jones rose on Friday [https://www.tradingview.com/symbols/TVC-DJI/]; meanwhile, the dollar index [https://www.tradingview.com/symbols/TVC-DXY/] and Treasury yields fell.

So, if stocks are rising and investors are optimistic, what's the problem?

If the Federal Reserve starts making policy decisions based on political pressure rather than macroeconomic data, such as inflation trends or employment figures, its independence could be questioned. And once confidence in the Fed's autonomy erodes, capital could start fleeing the United States.

We have already seen a similar reaction. Back in April, U.S. stocks suffered heavy losses after Trump stepped up his public attacks on Jerome Powell to lower interest rates. More recently, futures turned negative on Monday after Trump announced his plans to remove Federal Reserve Governor Lisa Cook.

The reason? Cook is accused of mortgage fraud. She allegedly took out two mortgages and declared both homes as primary residences, which carries lower rates. If true, this is suspicious. But it is also convenient for Trump. Firing her would allow him to appoint someone more willing to lower rates at his whim.

The problem is that she has already said she won’t step down.

For now, the FOMC has 12 voting members. Two are Trump appointees already pushing for faster cuts, and one seat is empty after Adriana Kugler’s resignation. If Cook is forced out, Trump’s influence could rise to nearly one-third of the votes — a worrying foothold, but still short of control.

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