President Trump’s unprecedented attempt to fire Federal Reserve governor Lisa Cook “for cause” over alleged mortgage misrepresentation marks the first such intervention since the Fed’s founding in 1913, according to Evercore ISI. Krishna Guha, vice chairman and head the Global Policy and Central Bank Strategy team at Evercore ISI, warned that this move “intensifies Trump’s efforts to gain more control over the Fed and the threat to its independence,” highlighting how markets ( SP500 ), ( COMP:IND ), ( DJI ) have focused too narrowly on whether Trump might fire Powell while missing the broader implications of potential “Trumpification” of the Fed Board. If Cook is forced out, Trump’s appointee would create a 4-3 majority of Trump-selected governors on the Fed Board, potentially allowing them to block the reappointment of certain Reserve Bank presidents during the normally routine five-yearly renewal process expected in February. “This majority could be used to deny certain Reserve Bank presidents – possibly Goolsbee in Chicago, perhaps even Williams in New York – reappointment,” Guha said, suggesting a fundamental shift in Fed governance that could happen within months. The legal battle centers on whether Trump has the authority to determine what constitutes “cause” for dismissal, with Cook contesting that standard has not been met. “A key question is whether the courts will allow her to remain in office – denying Trump an immediate replacement – while the litigation proceeds,” Guha added. He emphasized that while previous courts have not temporarily reinstated regulators fired by Trump, the Supreme Court has indicated it views the Fed differently. A “Trumpified” Fed could adopt drastically different monetary approaches, the analyst suggests, potentially encompassing “a new approach to models and forecasting, a strong look-through approach to tariff inflation, less inertia in policy allowing more rapid cuts down towards neutral, the assumption of a lower neutral rate and a lower NAIRU” – the non-accelerating inflation rate of unemployment, or the lowest unemployment rate at which inflation will not accelerate. Guha specifically warned of “perhaps an asymmetrically activist approach to guarding against downside risk to the labor market relative to upside risk to inflation,” signaling a fundamental departure from established Fed practices. Market reactions to these developments could include “a steeper yield curve, higher inflation compensation and a higher inflation risk premium, and in particular a weaker dollar ( DXY ), both in terms of FX, gold ( XAUUSD:CUR ) and bitcoin ( BTC-USD ),” Guha said. He also cautioned that while equities might initially benefit from “any short-term boost to nominal GDP from dovish-skewed policy,” they remain “vulnerable to de-rating over time as institutional quality erodes and to a potential riot in the bond market at a moment that is very hard to predict.” In conclusion, “asset markets are not properly priced for what increasingly seems likely to be a rupture in Fed independence and the policy reaction function in 2026.” More on the markets: Trump’s threat to fire Fed Gov. Cook could lead to higher interest rates Trump fires Fed Governor Lisa Cook Momentum leaders: 10 S&P 500 stocks soaring above their 200-day moving averages ETF flows surge past $750B in 2025, eyeing second straight $1T year SA analyst upgrades/downgrades: PLTR, PANW, PEP, and HTZ
