President Donald Trump this week called on a Federal Reserve governor to resign over an accusation of mortgage fraud, the latest effort by his administration to exert greater control over one of the few remaining independent agencies in Washington.

Federal Reserve governor Lisa Cook says she won’t leave her post.

Trump has repeatedly attacked the Fed’s chair, Jerome Powell, for not cutting its short-term interest rate, and even threatened to fire him. Powell, who will speak Friday at an economic symposium in Jackson Hole, Wyoming, says the Fed wants to see how the economy responds to Trump’s sweeping tariffs on imports, which Powell says could push up inflation.

Powell’s caution has infuriated Trump, who has demanded the Fed cut borrowing costs to spur the economy and reduce the interest rates the federal government pays on its debt. Trump has also accused Powell of mismanaging the U.S. central bank’s $2.5 billion building renovation project.

Firing the Fed chair or forcing out a governor would threaten the Fed’s venerated independence, which has long been supported by most economists and Wall Street investors. Here’s what to know about the Fed:

Why the Fed’s independence matters

The Fed wields extensive power over the U.S. economy. By cutting the short-term interest rate it controls — which it typically does when the economy falters — the Fed can make borrowing cheaper and encourage more spending, accelerating growth and hiring. When it raises the rate — which it does to cool the economy and combat inflation — it can weaken the economy and cause job losses.

Economists have long preferred independent central banks because they can more easily take unpopular steps to fight inflation, such as raise interest rates, which makes borrowing to buy a home, car, or appliance more expensive.

The importance of an independent Fed was cemented for most economists after the extended inflation spike of the 1970s and early 1980s. Former Fed Chair Arthur Burns has been widely blamed for allowing the painful inflation of that era to accelerate by succumbing to pressure from President Richard Nixon to keep rates low heading into the 1972 election. Nixon feared higher rates would cost him the election, which he won in a landslide.

Paul Volcker was eventually appointed chair of the Fed in 1979 by President Jimmy Carter, and he pushed the Fed’s short-term rate to the stunningly high level of nearly 20%. (It is currently 4.3%). The eye-popping rates triggered a sharp recession, pushed unemployment to nearly 11%, and spurred widespread protests.

Yet Volcker didn’t flinch. By the mid-1980s, inflation had fallen back into the low single digits. Volcker’s willingness to inflict pain on the economy to throttle inflation is seen by most economists as a key example of the value of an independent Fed.

Investors are watching closely

An effort to fire Powell would almost certainly cause stock prices to fall and bond yields to spike higher, pushing up interest rates on government debt and raising borrowing costs for mortgages, auto loans, and credit card debt. The interest rate on the 10-year Treasury is a benchmark for mortgage rates.

Most investors prefer an independent Fed, partly because it typically manages inflation better without being influenced by politics but also because its decisions are more predictable. Fed officials often publicly discuss how they would alter interest rate policies if economic conditions changed.

If the Fed was more swayed by politics, it would be harder for financial markets to anticipate — or understand — its decisions.

The Fed’s independence doesn’t mean it’s unaccountable

Fed chairs like Powell are appointed by the president to serve four-year terms, and have to be confirmed by the Senate. The president also appoints the six other members of the Fed’s governing board, who can serve staggered terms of up to 14 years.

Those appointments can allow a president over time to significantly alter the Fed’s policies. Former president Joe Biden appointed four of the current seven members: Powell, Cook, Philip Jefferson, and Michael Barr. A fifth Biden appointee, Adriana Kugler, stepped down unexpectedly on Aug. 1, about five months before the end of her term. Trump has already nominated his top economist, Stephen Miran, as a potential replacement, though he will require Senate approval. Cook’s term ends in 2038, so forcing her out would allow Trump to appoint a loyalist sooner.

Trump will be able to replace Powell as Fed chair in May 2026, when Powell’s term expires. Yet 12 members of the Fed’s interest-rate setting committee have a vote on whether to raise or lower interest rates, so even replacing the Chair doesn’t guarantee that Fed policy will shift the way Trump wants.

Congress, meanwhile, can set the Fed’s goals through legislation. In 1977, for example, Congress gave the Fed a “dual mandate” to keep prices stable and seek maximum employment. The Fed defines stable prices as inflation at 2%.

The 1977 law also requires the Fed chair to testify before the House and Senate twice every year about the economy and interest rate policy.

Could the president fire Powell before his term ends?

The Supreme Court earlier this year suggested in a ruling on other independent agencies that a president can’t fire the chair of the Fed just because he doesn’t like the chair’s policy choices. But he may be able to remove him “for cause,” typically interpreted to mean some kind of wrongdoing or negligence.

It’s a likely reason the Trump administration has zeroed in on the building renovation, in hopes it could provide a “for cause” pretext. Still, Powell would likely fight any attempt to remove him, and the case could wind up at the Supreme Court.

This story was originally featured on Fortune.com

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Federal Reserve Chair Jerome Powell on Friday opened the door ever so slightly to lowering a key interest rate in the coming months but gave no hint on the timing of a move and suggested the central bank will proceed cautiously as it continues to evaluate the impact of tariffs and other policies on the economy.

In a high-profile speech closely watched at the White House and on Wall Street, Powell said that there are risks of both rising unemployment and stubbornly higher inflation. Yet he suggested that with hiring sluggish, the job market could weaken further.

“The shifting balance of risks may warrant adjusting our policy stance,” he said, a reference to his concerns about weaker job gains and a more direct sign that the Fed is considering a rate cut than he has made in previous comments.

Still, Powell’s remarks suggest the Fed will proceed carefully in the coming months and will make its rate decisions based on how inflation and unemployment evolve.

“The stability of the unemployment rate and other labor market measures allows us to proceed carefully as we consider changes to our policy stance,” Powell said. That suggests the Fed will continue to evaluate jobs and inflation data as it decides whether to cut rates, including at its next meeting Sept. 16-17.

The stock market jumped in response to Powell’s remarks, with the broad S&P 500 index rising 1.4% in early trading.

Powell spoke with the Fed under unprecedented public scrutiny from the White House, as President Donald Trump has repeatedly insulted Powell and has urged him to cut rates, arguing there is “no inflation” and saying that a cut would lower the government’s interest payments on its $37 trillion in debt.

While Powell spoke, Trump told reporters in Washington, D.C. that he would fire Federal Reserve Governor Lisa Cook if she did not step down over allegations from an administration official that she committed mortgage fraud.

If Cook is removed, that would give Trump an opportunity to put a loyalist on the Fed’s governing board. The Fed has long been considered independent from day-to-day politics.

Powell spoke at the Fed’s annual economic symposium in Jackson Hole, Wyoming, a conference with about 100 academics, economists, and central bank officials from around the world. He was given a standing ovation before he spoke.

In his remarks, the Fed chair underscored that tariffs are lifting inflation and could push it higher in the coming months.

“The effects of tariffs on consumer prices are now clearly visible. We expect those effects to accumulate over coming months, with high uncertainty about timing and amounts,” Powell said.

Inflation has crept higher in recent months though it is down from a peak of 9.1% three years ago. Tariffs have not spurred inflation as much as some economists worried but are starting to lift the prices of heavily imported goods such as furniture, toys, and shoes.

Consumer prices rose 2.7% in July from a year ago, above the Fed’s target of 2%. Excluding the volatile food and energy categories, core prices rose 3.1%.

Regarding the job market, Powell noted that even as hiring has slowed sharply this year, the unemployment rate remains low. He added that with immigration falling sharply, fewer jobs are needed to keep unemployment in check.

Yet with hiring sluggish, the risks of a sharper downturn, with rising layoffs, has risen, Powell said.

Powell added that higher prices from tariffs could cause a one-time shift to prices, rather than an ongoing bout of inflation. Other Fed officials have said that is the most likely outcome and as a result the central bank can cut rates to boost the job market.

Powell, however, suggested it is largely up to the Fed to ensure tariffs don’t lead to sustained inflation.

“Come what may, we will not allow a one-time increase in the price level to become an ongoing inflation problem,” he said.

Powell also suggested the Fed would continue to make its decisions free from political pressure.

Fed officials “will make these decisions, based solely on their assessment of the data and its implications for the economic outlook and the balance of risks. We will never deviate from that approach.”

This story was originally featured on Fortune.com

© AP Foto/Manuel Balce Ceneta

Federal Reserve governor Lisa Cook late Wednesday said she wouldn’t leave her post after Trump on social media called on her to resign over an accusation from one his officials that she committed mortgage fraud.

“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Cook said in a statement issued by the Fed.

Bill Pulte, the head of the agency that regulates mortgage giants Fannie Mae and Freddie Mac and a Trump appointee, alleged on the X social media platform early Wednesday that Cook had claimed two primary residences — in Ann Arbor, Michigan and Atlanta — in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those purchased to rent.

Trump followed up Pulte’s accusation by calling on Cook to resign, in the latest effort by the administration to exert greater control over one of the few remaining independent agencies in Washington. Trump has repeatedly attacked the Fed’s chair, Jerome Powell, for not cutting its short-term interest rate, and even threatened to fire him.

If Cook is forced off the Fed’s governing board, it would provide Trump an opportunity to appoint a loyalist. Trump has said he would only appoint officials who would support cutting rates.

Pulte urged the Justice Department to investigate Cook, who was appointed to the Fed’s governing board by former president Joe Biden in 2022. She was reappointed the following year to a term that lasts until 2038, the longest remaining term among the seven governors.

Cook also said, “I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.”

Pulte, in a letter to Attorney General Pam Bondi, said that on June 18, 2021, Cook purchased a home in Ann Arbor and then two weeks later bought a condo in Atlanta. Before joining the Fed, Cook taught at Michigan State University. Pulte also charged that Cook has listed her condo in Atlanta for rent.

A Justice Department spokesperson declined to comment.

Just last month, Trump blasted Powell for the ballooning cost of the renovation of two of the Fed’s headquarters buildings, even suggesting that the run-up in costs could constitute a firing offense. He backed off his threats to fire Powell after receiving a tour of the project.

Pulte also suggested that Cook’s alleged actions could constitute a fireable offense. Fed officials are protected by law from being removed by a president, except “for cause,” which is generally seen as some kind of malfeasance or dereliction of duty.

Either way, if Trump seeks to fire Cook, it could lead to a court battle over a president’s power to remove Fed governors.

Senate Democrats, including New York Sen. Chuck Schumer, expressed support for Cook and slammed Trump’s actions.

“Trump is a liar. Lisa Cook—stand tough and don’t let Trump intimidate you,” Schumer wrote in a post on social media platform X.

Massachusetts Sen. Elizabeth Warren said in a statement that Trump “has been scrambling for a pretext to intimidate or fire Chair Powell and members of the Federal Reserve Board while blaming anyone but himself for how his failed economic policies are hurting Americans.”

Trump will be able to replace Chair Jerome Powell in May 2026, when Powell’s term expires. Yet 12 members of the Fed’s interest-rate setting committee have a vote on whether to raise or lower interest rates, so even replacing the Chair doesn’t guarantee that Fed policy will shift the way Trump wants.

But the more members of the Fed’s governing board that Trump can appoint, the more control he will be able to assert over the Fed, which has long been considered independent from day-to-day politics.

All seven members of the Fed’s governing board are able to vote on rate decisions. The other five voters include the president of the Fed’s New York branch and a rotating group of four of the presidents of the Fed’s other 11 regional branches.

Trump appointed two members of the Fed’s board in his first term, Christopher Waller and Michelle Bowman. Both dissented July 30 from the central bank’s decision to keep its rate unchanged, in favor of a rate cut.

Another Fed governor, Adriana Kugler, stepped down unexpectedly Aug. 1, and Trump has nominated one of his economic advisers, Stephen Miran, to fill out the remainder of her term until January.

If Trump is able to replace Cook, the first Black woman to serve on the Fed’s board, as well as Kugler, that would give him a clear majority on the board of governors. If Powell leaves the board when his term as chair ends next May, then Trump will be able to fill a fifth spot. However, Powell could stay on the board until early 2028 after finishing his term as chair.

The presidents of the regional Federal Reserve banks are selected by the boards of directors of those banks, but are subject to the approval of the Fed’s board of governors. The terms of all 12 of the regional Fed presidents end next February.

Trump has for months demanded that the Federal Reserve reduce the short-term interest rate it controls, which currently stands at about 4.3%. He has also repeatedly insulted Powell, who has said that the Fed would like to see more evidence of how the economy evolves in response to Trump’s sweeping tariffs before making any moves. Powell has also said the duties threaten to raise inflation and slow growth.

Trump says that a lower rate would reduce the government’s borrowing costs on $37 trillion in debt and boost the housing market by reducing mortgage rates. Yet mortgage borrowing costs and other interest rates, including many of the ones the government pays, do not always follow the Fed’s rate decisions.

The Trump administration has made similar claims of mortgage fraud against Democrats that Trump has attacked, including California Sen. Adam Schiff and New York Attorney General Letitia James.

This story was originally featured on Fortune.com

© AP Photo/Manuel Balce Ceneta, File

WASHINGTON (AP) — Most Federal Reserve officials said last month that the threat of higher inflation was a greater concern than the potential for job losses, leading the central bank to keep its key rate unchanged.

According to the minutes of the July 29-30 meeting, released Wednesday, members of the Fed’s interest-rate setting committee “assessed that the effects of higher tariffs had become more apparent in the prices of some goods but that their overall effects on economic activity and inflation remained to be seen.”

The minutes underscored the reluctance among the majority of the Fed’s 19 policymakers to reduce the central bank’s short-term interest rate until they get a clearer sense of the impact of President Donald Trump’s sweeping tariffs on inflation. So far inflation has crept up in the past couple of months but hasn’t risen as much as many economists feared when Trump unveiled some of his duties.

The Fed left its key interest rate unchanged last month at about 4.3%, though two members of its governing board dissented in favor of a rate cut. Both dissenters — Christopher Waller and Michelle Bowman — were appointed to the board during Trump’s first term.

At a news conference after the meeting, Chair Jerome Powell signaled that it might take significant additional time for the Fed to determine whether Trump’s sweeping tariffs are boosting inflation.

When the Fed changes its rate, it often — though not always — affects borrowing costs for mortgages, auto loans, and credit cards.

The Fed typically keeps its rate high, or raises it, to cool borrowing and spending and combat inflation. It often cuts its rate to bolster the economy and hiring when growth is cooling.

This story was originally featured on Fortune.com

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President Donald Trump on Wednesday called on Federal Reserve governor Lisa Cook to resign after a member of his administration accused Cook of committing mortgage fraud, the latest example of the Trump administration’s efforts to gain control over the central bank.

Bill Pulte, director of the agency that oversees mortgage giants Fannie Mae and Freddie Mac, urged the Justice Department to investigate Cook, who was appointed to the Fed’s governing board by former president Joe Biden in 2022. She was reappointed the following year to a term that lasts until 2038, the longest remaining term among the seven governors.

Pulte, in a letter to Attorney General Pam Bondi, alleged that Cook claimed two homes as her principal residences in 2021 to fraudulently obtain better mortgage lending terms. On June 18 of that year she purchased a home in Ann Arbor, Michigan, and then two weeks later bought a condo in Atlanta, Georgia, the letter said.

Pulte also charged that Cook has listed her condo in Atlanta, Georgia, for rent. Mortgages for homes used as principal residences typically carry lower interest rates than properties that are purchased to rent, the letter said.

The Federal Reserve declined to comment on the accusation. A Justice Department spokesperson also declined to comment.

The allegation represents another front in the Trump administration’s attack on the Fed, which has yet to cut its key interest rate as Trump has demanded. If Cook were to step down, then the White House could nominate a replacement. And Trump has said he would only appoint people who would support lower rates.

The more members of the Fed’s governing board that Trump can appoint, the more control he will be able to assert over the Fed, which has long been considered independent from day-to-day politics.

Trump will be able to replace Chair Jerome Powell in May 2026, when Powell’s term expires. Yet 12 members of the Fed’s interest-rate setting committee have a vote on whether to raise or lower interest rates, so even replacing the Chair doesn’t guarantee that Fed policy will shift the way Trump wants.

Yet appointing more board members would give Trump more power over the institution. All seven members of the Fed’s governing board are able to vote on rate decisions. The other five voters include the president of the Fed’s New York branch and a rotating group of four of the presidents of the Fed’s other 11 regional branches.

Trump appointed two members of the Fed’s board in his first term, Christopher Waller and Michelle Bowman. Both dissented July 30 from the central bank’s decision to keep its rate unchanged, in favor of a rate cut.

Another Fed governor, Adriana Kugler, stepped down unexpectedly Aug. 1, and Trump has appointed one of his economic advisers, Stephen Miran, to fill out the remainder of her term until January.

If Trump is able to replace Cook, the first Black woman to serve on the Fed’s board, as well as Kugler, that would give him a clear majority on the board of governors. If Powell leaves the board when his term as chair ends next May, then Trump will be able to fill a fifth spot. However, Powell could stay on the board until early 2028 after finishing his term as chair.

The presidents of the regional Federal Reserve banks are selected by the boards of directors of those banks, but are subject to the approval of the Fed’s board of governors. The terms of all 12 of the regional Fed presidents end next February.

Trump has for months demanded that the Federal Reserve reduce the short-term interest rate it controls, which currently stands at about 4.3%. He has also repeatedly insulted Powell, who has said that the Fed would like to see more evidence of how the economy evolves in response to Trump’s sweeping tariffs before making any moves. Powell has also said the duties threaten to raise inflation and slow growth.

Trump says that a lower rate would reduce the government’s borrowing costs on $37 trillion in debt and boost the housing market by reducing mortgage rates. Yet mortgage borrowing costs do not always follow the Fed’s rate decisions.

The Trump administration has made similar claims of mortgage fraud against Democrats that Trump has attacked, including California Sen. Adam Schiff and New York Attorney General Letitia James.

This story was originally featured on Fortune.com

© Bloomberg / Contributor

President Donald Trump on Wednesday called on Federal Reserve governor Lisa Cook to resign after a member of his administration accused Cook of committing mortgage fraud.

Bill Pulte, director of the agency that oversees mortgage giants Fannie Mae and Freddie Mac, urged the Justice Department to investigate Cook, who was appointed to the Fed’s governing board by former president Joe Biden in 2022. She was reappointed the following year to a term that lasts until 2038.

Pulte alleged that Cook has claimed two homes as her principal residences — one in Georgia, the other in Michigan — to fraudulently obtain better mortgage lending terms.

The allegation represents another front in the Trump administration’s attack on the Fed, which has yet to cut its key interest rate as Trump has demanded. If Cook were to step down, then the White House could nominate a replacement. And Trump has said he would only appoint people who would support lower rates.

The Federal Reserve declined to comment on the accusation.

Trump has for months demanded that the Federal Reserve reduce the short-term interest rate it controls, which currently stands at about 4.3%. Trump says that a lower rate would reduce the government’s borrowing costs on $37 trillion in debt and boost the housing market by reducing mortgage rates. Yet mortgage borrowing costs do not always follow the Fed’s rate decisions.

The Trump administration has made similar claims of mortgage fraud against Democrats that Trump has attacked, including California Sen. Adam Schiff and New York Attorney General Letitia James.

This story was originally featured on Fortune.com

© SAUL LOEB/AFP via Getty Images