The independence of the U.S. Federal Reserve, long considered a cornerstone of economic stability, has come under unprecedented scrutiny and political pressure in recent weeks. The controversy centers on President Donald Trump’s public attacks on the Fed, his attempt to remove one of its governors, Lisa Cook, and the resulting alarm voiced by central bankers and economists on both sides of the Atlantic.
Bank of England Governor Andrew Bailey did not mince words when he addressed the UK’s Treasury Select Committee on September 3, 2025. "This is a very serious situation, I am very concerned," Bailey said, referencing President Trump’s repeated threats and interventions directed at the U.S. central bank. According to BBC, Bailey described these threats as a "very dangerous road to go down" and stressed the vital importance of the Fed’s independence for the global economy. "The Federal Reserve is the central bank for the world's largest economy. It is a leading central bank. It has built up a very strong reputation for independence and its decision-making so this is very concerning," he told MPs.
Bailey’s alarm echoed that of European Central Bank (ECB) President Christine Lagarde, who warned that any loss of independence at the Fed would have a "very worrying" effect on economic stability worldwide. Lagarde, quoted by BBC, called such a development a "very serious danger" for the global economy. Both leaders’ comments reflect mounting anxiety within the international financial community as Trump, since his return to the White House in January, has openly pressured the Fed to slash interest rates—rates that have held steady between 4.25% and 4.5% since December 2024.
While the ECB and the Bank of England have both trimmed borrowing costs multiple times over the past year, the Fed has held its ground. Trump, however, has not been shy about expressing his displeasure. He has repeatedly lambasted Fed Chair Jerome Powell for being "too late" and "lousy" at his job, according to BBC. The President’s most confrontational move came when he attempted to fire Federal Reserve Governor Lisa Cook, a move that has sparked legal and political turmoil.
Cook’s case is especially notable for several reasons. Appointed in 2022, she became the first Black woman to serve as a governor on the Federal Reserve Board—a historic milestone. Now, as reported by Fox News Digital, Cook is suing President Trump in federal court after he declared her "fired, effective immediately" over allegations related to mortgage disclosures. Trump and Federal Housing Finance Agency Director William Pulte, his appointee, have accused Cook of mortgage fraud, claiming she listed all three of her properties as primary residences to secure better loan terms.
Cook, however, contends that she disclosed all relevant mortgage information during her confirmation process in 2022. In her September 2, 2025, court filing in Washington, D.C., Cook argued that any inconsistencies were known to both the White House and the U.S. Senate when she was confirmed and therefore cannot be used as grounds for her removal now. As Reuters reported, Cook’s lawsuit is likely to end up before the Supreme Court, given the unprecedented nature of a president attempting to remove a sitting Fed governor.
The attempted ouster has galvanized the economics profession. On September 2, more than 590 economists—including Nobel laureate Joseph Stiglitz and former Council of Economic Advisers Chair Jared Bernstein—signed an open letter supporting Cook and warning against political interference at the Fed. "Recent public statements about Governor Cook—including threats of removal and a claim that she has been fired—have arrived alongside unproven accusations," the economists wrote, as cited by Fox News Digital. "This approach threatens the fundamental principle of central bank independence and undermines trust in one of America’s most important institutions."
The letter, organized by University of Illinois finance professor Tatyana Deryugina, was meant to underscore the profession’s consensus on the importance of central bank independence. Deryugina explained, "I know that most economists learn about and understand the importance of central bank independence. But it may not be obvious to the American public and at least some politicians how important that independence is for economic stability and what independence from political influence should look like in practice." She added, "I wanted the letter to illustrate the consensus in the profession to the President, Congress, and the American public."
The structure of the Federal Reserve Board itself was designed to insulate it from political swings. The seven governors are nominated by the president and confirmed by the Senate, each serving staggered 14-year terms—much longer than any president’s tenure. Cook’s term, for example, runs until January 2038. This arrangement was intended to keep monetary policy decisions above partisan politics, ensuring that the economy’s long-term interests are protected from short-term political calculations.
Yet, as Bailey pointed out to the UK Parliament, the current climate in the U.S. suggests that politicians are increasingly tempted to "trade off the foundations for those other decisions"—in other words, to sacrifice central bank independence for immediate political gain. "I just think that is a very dangerous road to go down," Bailey said, warning of the potential consequences for both the U.S. and the global economy.
The uncertainty extends beyond the U.S. borders. Bailey noted that the UK has not yet experienced inflationary pressure from the higher tariffs imposed by Trump, but he cautioned that the situation could change. "If the world economy started to fragment and we got supply chain pressures as we did after Covid, of course, that would be inflationary," he said, according to BBC. Conversely, if the UK receives more Chinese exports due to U.S. tariffs on Chinese goods, it could actually push prices down. "We have to keep watching this closely," he added.
Meanwhile, the Bank of England faces its own challenges. Having cut interest rates from 4.25% to 4% in August 2025, the Bank’s policymakers are treading carefully as inflation continues to rise. Bailey admitted to the Treasury Select Committee, "There is now considerably more doubt about exactly when and how quickly we can make those further steps," though he maintained that the general direction for rates was "downwards gradually over time." The path, he conceded, is "a bit more uncertain frankly."
Adding to the complexity, the yield on 30-year UK government bonds recently climbed to its highest level since 1998, raising concerns about government borrowing costs ahead of Chancellor Rachel Reeves’s upcoming budget announcement. Bailey, however, urged caution in interpreting these figures, noting that the UK remains "broadly in the middle of the pack" compared to other economies. "It’s a number that gets quoted a lot. It is quite a high number but it is not what is being used for funding at all at the moment actually," he said.
As the legal battle over Lisa Cook’s position at the Fed heads toward a likely Supreme Court showdown, and as international central bankers warn of the dangers of political meddling, the world is watching closely. The outcome will not only shape the future of the Federal Reserve, but could also set a precedent for the independence of central banks everywhere—a principle that, until now, most considered inviolable.
