I’ve been writing about the US Federal Reserve (America’s Central Bank) quite a bit as of late. This week, the institution responsible for monetary policy in this country, found itself in the headlines for two major storylines.

Powell’s Jackson Hole Speech

On Friday August 22nd, Fed Chairman Powell gave a speech at an annual symposium in Jackson Hole, WY. Markets had been hoping that Powell would signal a likely rate cut in September during his comments and he did just that. “With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance” was a line revisited in many articles and seems to indicate that rates can (and will) start to come down. Powell had been focused on the potential inflationary impact from tariffs for most of 2025 but during his comments, he seemed to back away from that to a large extent.

Equity markets celebrated the news and rallied meaningfully on Friday.

Fed Independence at Risk

During the Jackson Hole meeting, there was a strange undercurrent – the need to preserve Fed independence. (Well written article by Wall Street Journal’s Nick Timiraos on that topic). President Trump has made it known that he wants lower interest rates (the belief being that will spark higher growth). He has publicly insulted Chair Powell but has stopped short of firing him.

This week, President Trump took another route to reach his clear objective (a Fed more aligned with his wishes). He fired Fed Governor Lisa Cook for allegations concerning her falsifying information on mortgage applications prior to her tenure (allegedly claiming two homes as her primary residence on mortgage applications). The President does have the right to terminate a Fed Governor “for cause” which typically involves gross misconduct and malfeasance but the question now becomes whether Cook’s actions would fall under those guidelines.

Cook has refused to resign and her lawyer said they would be filing a lawsuit to challenge the termination. The Fed said in a statement that it would abide by any court decision related to Cook and reaffirmed its independence. The President continues to state Cook is fired and discusses potential replacements. Needless to say, this issue will not be concluded anytime soon.

If the president is successful in replacing Cook with one of his allies, a majority of the Fed’s board would be made up of Trump-picked appointees. And if he’s not successful in replacing Cook, it’s reasonable to assume another route will be attempted to reach the desired outcome.

Markets did not react to the news this week, most likely due to all of the lingering uncertainty in the ability of the President to actually replace Cook. Undoubtedly, the independence of the Fed remains essential to the US economy and its markets, but at this stage, that independence remains in tact – for now.

This topic is far from resolved but for now, rest easy and enjoy your holiday weekend. See you back here next week.

Onward we go,