US President Trump is pushing for the removal of Federal Reserve Governor Lisa Cook. Media analysis suggests that if the removal is successful, he would have the opportunity to further expand the White House's influence over the Fed by securing a majority on the seven-member Board of Governors.

Media reports indicate that Trump has made it clear he wants the Fed to cut interest rates significantly. Under the leadership of Chairman Jerome Powell, the Fed has faced sustained attacks from the White House this year, whether on monetary policy decisions or issues like cost overruns on a major building renovation project.

On Wednesday, Trump called for Cook to resign after Federal Housing Finance Agency (FHFA) Director Bill Pulte accused Cook of lying on a loan application to obtain more favorable terms, alleging mortgage fraud. Cook's term lasts until 2038, and she subsequently responded that she would not resign under coercion.
Claudia Sahm, Chief Economist at New Century Advisors and a former Fed economist, said,

"This is a new approach by this administration to try to control the Fed. They are using every lever they can find to achieve that control."

Analysis suggests that the aggressive move against Cook highlights how far the Trump administration is willing to go to expand its influence over the central bank. Previously, the Fed had been largely insulated from political pressure regarding interest rate decisions. The White House has previously employed similar tactics against political opponents like California Senator Adam Schiff and New York Attorney General Letitia James.

The media also stated that this casts a shadow over the Fed's annual conference scheduled to begin Thursday evening in Jackson Hole, Wyoming. Powell is set to deliver the final keynote speech to global central bankers attending the conference on Friday morning and is unlikely to explicitly promise rate cuts as Trump desires.

Trump's "Allies" Gaining Board Majority Doesn't Guarantee White House Agenda

Fed officials have so far this year ignored Trump's demands for lower rates, citing inflation risks potentially caused by his tariffs.

Analysis believes that if Cook steps down, it would allow Trump to potentially appoint four Fed governors, giving him a majority on the seven-seat board. Trump already appointed two of the current governors during his first term and recently nominated his Council of Economic Advisers Chairman, Stephen Miran, to fill a third seat recently vacated early by Biden appointee Adriana Kugler.

This strategy aligns with Trump's approach to boards at other federal agencies, attempting to stock them with Republican nominees.

However, media believes that even if Trump secures a board majority, it does not mean he will get his way on interest rate decisions.

Trump's nominees would still need to garner support within the broader Federal Open Market Committee (FOMC), which is responsible for setting interest rates. Moreover, there is no guarantee that these new board members would simply carry out the president's wishes.

Another key issue is whom Trump will nominate to replace Powell when his term as chairman ends next May. Whether Trump gets a chance to appoint a fifth governor depends on whether Powell decides to remain on the board after his chairmanship ends; his governor term lasts until 2028.

William B. English, a former senior Fed economist now at Yale University, said.

"Even with another governor nomination, it's not guaranteed that a new chair could win support in the FOMC for easier monetary policy."

Interest rate decisions are made by the FOMC, a 12-member committee of policymakers in Washington and across the country who have voting rights on rates. This means that even if four Trump nominees support a policy move, they would still need to secure support from at least three other voting members to form a majority.

All seven board governors have permanent voting rights, as does the president of the New York Fed. The remaining four voting seats rotate annually among the other 11 regional reserve bank presidents.

Securing a majority on the board could give the White House greater influence in other policy areas, including bank regulatory matters, which fall under the board's purview, not the FOMC's. The board is also responsible for approving or denying the reappointment of regional reserve bank presidents to five-year terms.

"Allies" May Not Be Reliable

Further analysis suggests it remains unknown whether Trump's first-term appointees, Michelle Bowman and Christopher Waller, would be willing to align with the White House's wishes.

Bowman and Waller dissented in the July FOMC meeting decision to hold the benchmark rate steady, arguing for a 25 basis point cut citing signs of deterioration in the labor market requiring a policy response.

However, Waller, seen as a potential candidate to replace Powell as Fed chair, has also recently emphasized the importance of central bank independence, warning that a lack of investor trust in leadership could lead to rising inflation expectations and market interest rates.

Derek Tang, an economist at LH Meyer/Monetary Policy Analytics, said.

"Maybe Trump's idea is he can get four people who are completely loyal, but we can't be sure that the current governors would actually be loyal."

"The new ones presumably would be, because that's how they're being picked. But Bowman and Waller, who are currently there, have made economic arguments for why they favor easier policy."

Cook's Departure Might Prompt Powell to Stay on as Governor

Powell has not publicly stated his plans after his term as chairman ends next May. Traditionally, Fed chairs have left the leadership after stepping down as chairman, even if their governor term continues.

However, some analysis suggests that if Cook leaves early, it could put pressure on the 72-year-old Powell to remain in his governor seat to provide some buffer against political interference.

Andrew Brenner, head of International Fixed Income at NatAlliance Securities, wrote in a report on Wednesday,

"This is why we think Powell will stick it out and remain on the Fed board until his term expires in January 2028."