United States stock futures dipped Tuesday after President Donald Trump announced the removal of Federal Reserve Governor Lisa Cook, an extraordinary step widely viewed as a direct attack on the central bank’s independence.
Dow Jones Industrial Average futures slipped 45 points, or 0.1%, while S&P 500 and Nasdaq-100 futures each fell 0.1%. The U.S. dollar weakened 0.3%, and Treasury yields steepened as investors weighed the implications of a politicized Fed.
Trump, in a letter posted on Truth Social late Monday, accused Cook of making false statements on two mortgage applications, saying this provided “cause” for her dismissal. “It is inconceivable that you were not aware of your first commitment when making the second,” Trump wrote, citing conflicting declarations of primary residence.
Cook, the first Black woman appointed to the Fed board, rejected the allegations and vowed to fight. “President Trump purported to fire me ‘for cause’ when no cause exists under the law,” she said, adding she would not resign. Her lawyer, Abbe David Lowell, called the move “illegal” and promised a court challenge.
Under the law, a president can only remove a Fed governor “for cause,” a vague standard that could trigger a legal battle. The Fed has not commented.
The decision marks a sharp escalation in Trump’s campaign to force aggressive rate cuts. He has repeatedly attacked Fed Chair Jerome Powell and suggested firing him. If Cook is ousted and another vacancy filled, Trump could tilt the board in his favour.
Markets are focused on whether this standoff signals broader political interference. “The Fed’s independence is undeniably being undermined, a process with negative long-term consequences,” said Adam Crisafulli of Vital Knowledge.
Investors now await Nvidia’s earnings and key inflation data for clues on the Fed’s next move.
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