For months, Trump has tried various methods and strategies to influence the Federal Reserve. His efforts against Powell did not succeed. Following this, Kugler resigned shortly before the end of his term, and Trump nominated Miran to take his place. Subsequently, Trump announced the dismissal of FOMC member Lisa Cook, but this matter was taken to court.
Fed Member Cook’s Legal Battle
An unusual scenario emerged when Trump declared Cook’s removal, yet her name remained on the Federal Reserve’s website. A federal judge delivered unfavorable news for Trump in his attempt to take control of the Fed, temporarily halting the dismissal and enabling Lisa to vote at next week’s meeting.
Next week, the Fed is anticipated to announce its first interest rate cut. Although Trump attempted to remove her, Cook will maintain her seat. This decision may be unfavorable for Trump, but it positively impacts the discourse regarding the Fed’s independence.
U.S. District Judge Jia Cobb believes that Trump’s rushed dismissal attempt hindered addressing its allegations. Trump plans to appeal, and the Department of Justice recently launched a criminal investigation against Cook to establish her culpability.
“A dismissal shouldn’t depend on speculative future performance based on unproven behaviors before assuming office,” said the Judge.
Previously covered allegations of mortgage fraud occurring in 2021, before Cook took office in 2022, form a significant defense for her. Nonetheless, the decision reflects positively on the Fed’s independence.
Impending Interest Rate Cuts by the Fed
Senate Committee endorsed Miran’s nomination with a 13-11 vote, and Trump aims to keep him in the institution beyond January 31st. Given the dire necessity as reflected by existing data, Cook’s issue isn’t critical. The next Fed meeting is scheduled for October 29th, where a rate cut is expected with 80% certainty.
Provided that inflation and employment trends stay constant, even if the tariffs don’t yield catastrophic inflationary results, interest rates will be lowered, although not at the pace Trump desires.
By May, the Fed will have held six meetings including September. Markets expect around 125bp cuts, falling short of Trump’s desire for a minimum 300bp cut. While removing Cook could accelerate rate cuts, fully taking control requires Powell’s resignation, who seems unlikely to leave before his term concludes.
In summary, Trump didn’t achieve his goals, but a judge’s decision diffused the negative sentiment lingering from 55 years of central bank independence narratives. With slow yet downward interest rate decisions, structural debates are avoided, fostering optimism for cryptocurrencies in the final quarter.
