In the coming days, the Supreme Court is expected to rule in Trump v. Cook, the case testing whether President Trump can remove Federal Reserve Governor Lisa Cook over allegations of mortgage-related misconduct that predate her time on the Board. The stakes are concrete. Of the Board’s seven seats, three are Trump appointees: newly installed Chair Kevin Warsh, Governor Christopher Waller, and Governor Michelle Bowman. Losing Cook’s seat to another Trump pick would give the administration a working majority on the Board.
Whichever way the Court rules, the underlying problem of Fed independence will remain, for reasons that have less to do with the case than with how the Fed has operated for the past year.
The Independence Dilemma
The case for central bank independence rests on a narrow problem: elected officials face short election cycles and a standing incentive to lean on the central bank for looser money before a vote, whether or not economic conditions warrant. If the public expects political pressure to win out, then the public assumes higher inflation as the norm — seriously compromising future monetary policymaking.
Congress’s fix to this problem was long and staggered terms for Fed Board members, with narrower limits on their removal from office “for cause” only, rather than being at-will political appointments. Over the past year, the boundaries of that limit have been tested with threats of removal, litigation, and informal arm-twisting.
The combined effects have led to a monetary policymaking dilemma: are monetary policy decisions being made to counter political pressure, conform to it, or because they are really the right policy moves for the nation? If Fed officials are operating under constant political threat, the institution’s own decisions become illegible. If political pressure for, say, lowering rates points in the same direction as the Fed’s technical analysis, then lowering the rates can be read as technical independence or capitulation to political pressure.
When the Right Call Looks Political
From the outside, it’s impossible to tell if the Fed is conducting monetary policy according to what it believes is right or knowingly doing something else to protect its credibility, or worse, caving to political pressure. Two recent episodes show the damaging effects of this dilemma in practice.
For most of 2025, the Fed refused to cut rates despite extreme public pressure from Trump. The data backed holding rates steady, but that’s exactly the problem. A Fed holding the line when it already agrees with holding the line cannot prove it would have done the same thing absent the pressure. Former Fed Chair Jerome Powell’s repeated public refusal to cut rates might have been the correct policy call, institutional defiance, or some mix of both. The public has no way to tell which.
The same illegibility now follows Kevin Warsh. Can the public trust Warsh’s claims of independence, given that Trump endorsed him in part because he expects Warsh to deliver lower rates?
Trump reportedly trusts Warsh enough to give him room to act. While Warsh built part of his case for the top Fed job on the argument that productivity gains could justify cutting rates, at his first meeting as Fed chair this month, he signaled essentially the opposite.
The Warsh-led Fed cut the FOMC policy statement to roughly a third of its previous length. It dropped language signaling a bias toward rate cuts; the same language three regional Reserve Bank presidents pushed to remove at April’s meeting. And the FOMC’s projections shifted toward a possible hike, not a cut, for 2026. Warsh himself declined to submit a projection at all.
That hawkish opening would normally count as evidence of independence. But in light of the past year’s experience, it could also just be a pretense of independence from someone who will try to deliver low rates at a later point. If the president’s trust survives this apparent defiance, the decision was never much of a test of Warsh’s independence.
Why the Court Can’t Settle It
The Supreme Court’s ruling in Trump v. Cook is very unlikely to solve this dilemma, regardless of the outcome.
In oral arguments back in January, the administration contended that the President’s decision to remove a Fed governor for cause is essentially unreviewable, while Cook’s side maintained that “for cause” has historically implied misconduct in office, with an associated review process.
A ruling for Trump would tell every future Fed governor that “for cause” means whatever a president decides it means. Justices seemed alert to the drawbacks of that possibility. Justice Kavanaugh observed that “history is a pretty good guide” and that “once these tools are unleashed, they are used by both sides,” regardless of which party wields them first.
A ruling in favor of Cook, on the other hand, still may not provide the clearest jurisprudence on what it takes to remove a Fed governor.
In the Supreme Court’s May 2025 ruling in a different case related to independent agencies, the Court exempted the Fed from its general removal-power decision, describing it as “a uniquely structured, quasi-private entity” with a “distinct historical tradition” separate from other independent agencies. Having carved out the Fed from that decision and protected its officials from removal, the justices may now prefer to rule narrowly in Cook on case-specific grounds. The result: what justifies “for cause” removal remains murky and subject to future litigation.
A narrow ruling protects Cook. It does nothing for the next Fed governor that a future president decides to target.
If every future governor is faced with the threat of being fired and needs to lawyer up on a case-by-case basis, central bank independence will de facto erode. So, too, its credibility, as every monetary policy decision can be second-guessed as to whether it was the right call for the broader economy or only for the politically connected.
Congress Must Fix the Fed’s Independence Ambiguity
Central bank independence is not a claim that politics has no place in monetary policy in a democracy. But independence and accountability sit on a single dial, as my colleague Alex Salter has pointed out. Where Congress sets it is a revisable policy choice.
If Congress wants to insulate the Fed from political cycles, then it should remove the ambiguity in statute and define “for cause” as issues with conduct or job performance, and ensure notice and a chance to respond before removal. This approach would put less reliance on the court’s interpretation and avoid future disputes over removals. It would also remove the ambiguity shrouding the motivations for monetary policy decisions. Congress created the original ambiguity. Only Congress can close it definitively, and do so proactively, to bring an end to the Fed independence dilemma.
