President Donald Trump is doubling down on his efforts to reshape the Federal Reserve, specifically aiming to remove Governor Lisa Cook and influence appointments at regional Fed branches. Trump reiterated his intention to seek Cook's removal following a Supreme Court decision that allowed her to remain in her post while challenging the administration's claims of mortgage fraud. The Supreme Court's 5-4 ruling faulted Trump for procedural errors, not on the merits of the allegations, leading Trump to vow a "perfect process" for her ouster. This move is seen by critics as part of a broader effort to influence the central bank's monetary policy.
Trump also weighed in on the new Federal Reserve Chair, Kevin Warsh, suggesting Warsh faces a "hostile" board that "wants to do the wrong thing." These comments came after a jobs report on Thursday showed significantly slowed US hiring in June and a drop in the unemployment rate to 4.2% as labor force participation shrank. Despite his past pressures on predecessor Jerome Powell for rate cuts, Trump's remarks about Warsh appeared to give the new chair some flexibility on interest rates. Warsh, in his confirmation hearings, had emphasized protecting the Fed's independence and committed to bringing inflation down to the 2% target, noting that price risks have recently decreased.
The weakened jobs report led investors to scale back their expectations of an interest rate increase this year. This environment, coupled with inflation that accelerated in May to the fastest pace in over three years due to higher energy costs from a war Trump launched with Israel against Iran, puts the economy at the forefront of the November midterm elections. Economists believe inflation has likely peaked as oil prices have fallen following an interim deal between the US and Iran, though negotiations for a broader peace deal remain uncertain, and rising costs are expected to continue impacting supply chains. Trump's administration has accused Cook of fraudulently listing homes in Michigan and Georgia to secure favorable loan terms, claims she denies as baseless. The White House is also trying to fill a vacancy at the Atlanta Fed to further reshape the central bank's power structure.
