When U.S. President Donald Trump moved to dismiss Federal Reserve Governor Lisa Cook on unsubstantiated mortgage fraud allegations, it wasn't just a personal clash – it marked a seismic shift in the Fed's role on the world stage.
The Federal Reserve's 14-year terms and removal protections requiring cause were crafted to shield monetary policy from political winds. Investors trust that decisions are guided by data, not election cycles. This move shattered that perception.
Global markets reacted with immediate unease. Stocks wavered, bond yields swung, and the dollar slipped as traders grappled with the idea that even the Fed's leadership could be reshuffled at a president's whim.
For financial hubs from Frankfurt to Singapore, the fallout is clear: if monetary moves risk becoming political bargaining chips, central banks and sovereign funds may rethink their reliance on U.S. signals.
Beyond day-to-day volatility, the dollar's longer-term dominance could be at risk. Its reserve currency status relies on unwavering confidence in U.S. institutions. Political interference could accelerate steps toward local-currency trade settlements, expanded euro reserves, or digital alternatives.
In an interconnected economy, the Fed's credibility is a global public good. This episode serves as a wake-up call: protecting central bank independence is not just an American concern – it's essential for worldwide financial stability.
Reference(s):
Trump's assault on the Fed: A blow to dollar credibility and stability
cgtn.com
