Former Federal Reserve chair Jerome Powell said the U.S. central bank would lose the credibility it needs to steady the economy if officials could be removed over policy disagreements. His warning comes as the Supreme Court weighs President Donald Trump’s effort to fire Fed Governor Lisa Cook.
The credibility stake
Powell, who led the Fed through the pandemic-era recovery, argued that the institution's power to calm markets and manage inflation depends on the public's trust that its decisions are based on data, not politics. If board members can be ousted simply because the White House dislikes their policy stance, that trust erodes. “The central bank would lose the credibility needed to steady the economy,” he warned, according to court filings reviewed by GFdaily.
What the Supreme Court is deciding
At the heart of the case is whether the president has the authority to remove a Fed governor without cause. Trump fired Cook in early 2025, claiming her voting record on interest rates conflicted with his economic agenda. Cook has challenged the dismissal, arguing that the Federal Reserve Act protects governors from removal except for inefficiency, neglect of duty, or malfeasance. The Supreme Court agreed to hear the case after a lower court reinstated Cook, ruling that presidents cannot fire independent-agency officials solely over policy differences.
The outcome could reshape the Federal Reserve’s independence – a principle central bankers worldwide have long guarded. The Fed sets interest rates to control inflation and support employment, and its decisions often clash with the short-term goals of any administration. A ruling that gives the president broad removal power could politicize monetary policy, potentially spooking bond markets and raising borrowing costs. Powell’s warning underscores that even the perception of political interference can undermine the Fed's ability to act during a crisis.
Oral arguments are scheduled for next month, with a decision expected by late June. Until then, Cook remains on the board, but the uncertainty hangs over every Fed meeting. Investors are watching closely – they've already started pricing in a risk premium on long-term Treasury yields.
