Donald Trump reportedly attempted to fire Federal Reserve governor

Donald Trump has stepped up his war on the Federal Reserve by trying to fire rate-setter Lisa Cook – prompting a constitutional crisis over the independence of America’s central bank. The US President said he was removing Cook as one of seven members of the Fed’s board of governors, ‘effective immediately’, over mortgage fraud allegations.

But Cook (pictured) said he had ‘no authority’ to remove her from the job and she would continue to carry out her duties. Her lawyer said she would file a lawsuit over the move. Trump’s unprecedented intervention was being closely watched by financial markets yesterday though the initial reaction was muted – with traders betting that the Fed remains on track to cut interest rates at its next meeting in September.

The dollar was slightly lower against a basket of currencies and is down by nearly 10 per cent so far this year. Gold prices also turned higher as investors sought safe havens. But New York stock indices were little changed as markets waited to see the outcome of the stand-off between Trump and Cook. It comes after a period of relentless pressure from the White House on the Fed and its governor Jerome Powell.

Trump has demanded that Powell cuts rates more quickly and labelled him a ‘numbskull’ for failing to act sooner. The President has even publicly flirted with the idea of firing Powell before backing down in the face of a sharp market backlash over the possibility that the Fed will have to act in line with Trump’s wishes.

He has already nominated his top economic advisor Stephen Miran to fill a vacant position on the Fed’s board. Last week, Powell did finally open the door to a rate cut – sending markets soaring – as he noted growing fears about unemployment.

But that was not enough to stop Trump’s attack on Cook, accusing her of ‘deceitful and criminal conduct in a financial matter’ and saying he did not have confidence in her ‘integrity’. Cook is due to serve on the Fed board through until 2038. Legislation allows for a sitting governor to be removed ‘for cause’ but the power has until now never been tested by US presidents.

The claims relate to two mortgages that she took out when she was an academic. A spokesperson for the Fed said legislation covering the rules under which a president may remove a governor from office served as ‘a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people’.