Despite Donald Trump’s unprecedented attempt to remove Lisa Cook from the Federal Reserve’s Board of Governors, financial markets remained surprisingly calm. The potential threat to the independence of the US central bank was largely overlooked by investors, who instead focused on Nvidia’s quarterly results – with the tech giant currently one of the key drivers of stock market growth. Yet this shift of attention away from fundamental institutional issues may prove to be a costly mistake in the long run.
The US dollar showed temporary weakness but quickly rebounded. On the Treasury market, there were no significant shifts – yields on 10-year notes fell slightly, while 30-year yields edged higher. Meanwhile, the main stock indices – the Dow Jones, S&P 500, and Nasdaq – continued their upward trend, as if the tensions surrounding the Federal Reserve carried little weight for market outlooks.
Experts Warn of Complacency
Analysts caution against the illusion of calm. Markets may be underestimating the risks posed by a potential erosion of the Fed’s independence, as well as the possibility of a policy shift after 2026. The muted response could reflect both a tendency to downplay threats and expectations that any disputes would ultimately be resolved in court.
If Trump succeeds in removing Cook, he would gain another seat on the Fed’s Board of Governors. Combined with the earlier resignation of Adriana Kugler, this could give him a majority of his own appointees. In practice, such a scenario might create a more dovish Fed, inclined toward earlier and deeper interest rate cuts. While this could benefit the housing and construction sectors, it also carries the risk of higher inflation and a weaker US dollar on global markets.
Political Betting Markets See a 33% Chance
On political prediction platforms such as Kalshi and Polymarket, the probability of Cook’s removal in 2025 is currently estimated at around 33%. Even though markets are behaving as if political interference in the Fed is a marginal issue, more economists and analysts are warning that the consequences could be severe. The independence of the Federal Reserve – long regarded as one of the cornerstones of US economic stability – may be undermined, potentially triggering a wave of unpredictable shifts in monetary policy and financial markets.
Author: Krzysztof Kamiński – OANDA TMS
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Source: CEO.com.pl
