US government debt has shown a decline following government intervention in the Federal Reserve. Lisa Cook's dismissal raises concerns about the independence of the central bank.
Dismissal of Lisa Cook and Its Implications
On Monday night, President Trump announced the firing of Fed Governor Lisa Cook 'effective immediately' after allegations of mortgage fraud.
Reports indicate that this decision is expected to be handled in court, allowing the White House to nominate a replacement likely 'more supportive' of Trump's push for lower interest rates.
Market Reaction to Political Intervention
In response to expected rate changes in September, the US bond market reacted to Cook's dismissal. The gap between two-year and 30-year yields reached over 1.2 percentage points, approaching a three-year high. The US dollar is gradually weakening, having lost more than 9% this year, which is associated with Trump's tariffs.
Economists on Government Intervention Risks
Economists warn about the negative consequences of government interference in monetary policy. For instance, Marieke Blom from ING noted that Cook's dismissal would cause 'significant damage to central bank independence.' Some experts argue that instability in institutional structures may lead to currency depreciation and increased risk premiums.
The situation surrounding Lisa Cook's dismissal and market reactions highlight the importance of central bank independence. Experts believe that any government intervention in monetary policy could have serious economic repercussions.
