The independence of the U.S. Federal Reserve was thrown into turmoil Monday after President Donald Trump announced he had fired Governor Lisa Cook, marking the first time in the Fed’s 111-year history that a sitting governor has been dismissed by a president.

Trump accused Cook of “gross negligence” and referenced allegations of mortgage fraud, though she has not been charged with any wrongdoing. The Justice Department has only confirmed an investigation into the matter. In a letter posted on social media, Trump said he no longer had “confidence” in Cook’s integrity as a financial regulator.

Cook swiftly rejected the move, saying Trump lacked the legal authority to remove her and that she would continue her duties. “I will not resign. I will continue to carry out my responsibilities to help the American economy,” she said in a statement. Her attorneys described the dismissal attempt as “illegal” and vowed to challenge it in court.

Legal and Political Uncertainty

By law, Fed governors may only be removed “for cause,” but the statute does not define what constitutes sufficient grounds. Legal experts expect a prolonged court fight that could reach the Supreme Court, leaving Cook’s status—and Trump’s power over the Fed—unresolved.

Appointed in 2022 by President Joe Biden, Cook made history as the first Black woman to serve as a Fed governor. Her dismissal attempt comes just weeks before the Fed’s next policy meeting on September 16–17, adding fresh uncertainty to an already sensitive economic moment.

Threat to Fed Independence

The clash has ignited alarm about the future of the Fed’s independence. The central bank was deliberately designed to be insulated from political pressures, allowing it to make decisions based on economic data rather than electoral cycles.

Former Fed vice chair Alan Blinder warned that Trump’s action threatens to turn the central bank into a political tool: “The Fed is designed to be independent of politics, for very good reasons. He is trying to end that and make it an arm of the Trump administration.”

Senator Elizabeth Warren called the move an “authoritarian power grab” that violates the Federal Reserve Act.

Market Reaction

Markets reflected investor unease. The U.S. dollar index slipped 0.3%, stock futures dropped—Dow down 0.2%, S&P 500 off 0.3%, Nasdaq 100 lower by 0.5%—while gold, a traditional safe haven, rose 0.45%.

What’s at Stake

If Trump succeeds, the precedent could undermine the Fed’s independence and credibility, raising borrowing costs for the U.S. and weakening global confidence in American economic stewardship. For now, Cook remains defiant, setting the stage for a historic legal battle with implications for monetary policy and the global economy.