Fed Independence Under Siege: Trump Interviews Replacements as Legal Battle Looms

The battle for control over the Federal Reserve has intensified, moving from rhetorical criticism to executive action. Reports confirm that President Trump is actively interviewing candidates to replace Chair Jerome Powell and is awaiting a Supreme Court ruling on his attempt to remove Fed Governor Lisa Cook.

The Candidates and the Policy Shift

The shortlist for the next Fed Chair reportedly includes Kevin Hassett, Christopher Waller, Kevin Warsh, and BlackRocks Rick Rieder. The administration is seeking a leader more aligned with a pro-growth, low-rate bias, conflicting with the traditional technocratic mandate of price stability.

Simultaneously, the legal push to fire Lisa Cook over unverified mortgage fraud allegations is viewed by legal scholars as a proxy war on the Fed's independence. If the Supreme Court allows the removal, it would shatter the precedent that insulates central bankers from political whims.

Forex Implications: The 'Institutional Risk' Discount

Currency markets rely on trust. The U.S. Dollar (USD) enjoys its “exorbitant privilege” largely due to the credibility of the Federal Reserve and the rule of law.

• Short-Term: Political pressure for lower rates could weaken the Dollar index (DXY) if markets believe the new Chair will tolerate higher inflation to fuel growth.
• Long-Term: The erosion of institutional independence poses a systemic risk. If global reserve managers perceive the Fed as an arm of the White House, the diversification away from USD treasuries could accelerate.

Investors should monitor the Supreme Court proceedings closely. A ruling against Fed independence could trigger a structural repricing of U.S. assets.