Trump threatens 2nd bid to oust Fed's Cook, calls board hostile

President Donald Trump used a CNBC interview to threaten a second attempt at removing Federal Reserve Governor Lisa Cook and to accuse Chair Kevin Warsh's board of being "hostile," even as Wall Street continued pricing in a rate hike.

Trump's renewed assault on the Fed's independence — promising a second push to oust Cook and calling the board under Warsh "a little bit hostile" and possibly "a board that wants to do the wrong thing" — landed with markets largely unmoved, with traders still pricing a rate hike.

"He has to do what he has to do," Trump said of Warsh and rate-cut expectations during the July 7 interview with CNBC's Joe Kernen. The president also said he plans to "rid of" Cook "by winning the case," referring to a legal challenge over his authority to remove a Fed governor before her term expires.

Wall Street barely blinked. The muted reaction suggests investors see limited near-term impact on the central bank's policy trajectory, though the political pressure adds a layer of uncertainty to the Fed's decision-making process. The fact that markets continue to price a rate hike — rather than the cuts Trump has publicly favored — underscores the gap between White House rhetoric and market reality.

The confrontation tests the credibility of the Fed's institutional independence at a moment when the central bank is navigating a delicate policy path. Any perception that political pressure is influencing rate decisions could undermine confidence in the dollar and push bond yields higher, raising borrowing costs across the economy.

Trump's relationship with the Fed has been a recurring flashpoint throughout his second term. He appointed Warsh as chair earlier this year, but the relationship has quickly deteriorated as the Fed has maintained a hawkish posture. Warsh, a former Fed governor appointed by President George W. Bush, has signaled continuity with the central bank's data-dependent approach rather than the accommodative stance Trump has publicly demanded.

The push to remove Cook — a Biden appointee who joined the board in 2022 — represents an escalation. Trump first attempted to remove her earlier in his term, arguing that her policy views diverged from his economic agenda. Legal scholars have questioned whether a president has the authority to remove a Fed governor before their term expires, a question that could ultimately be decided by the courts.

Rate-hike expectations hold firm

Despite Trump's public pressure campaign, the rates market is not cooperating. Traders continue to price in a rate increase at the Fed's upcoming meeting, reflecting an economy that has shown persistent inflationary pressures. The disconnect between the White House's preferred narrative and market pricing highlights the limits of political influence on an institution whose credibility rests on its independence.

What comes next

The Fed's next policy decision will be a critical test. If Warsh and the board deliver a hike as markets expect, it would represent a direct rebuke to Trump's pressure campaign and could intensify the confrontation. A hold, by contrast, would risk being interpreted as a concession, potentially damaging the central bank's credibility. The outcome will signal whether the Fed can maintain its institutional independence under sustained political pressure.

This article is for informational purposes only and does not constitute investment advice.