President Donald Trump on Aug. 25 announced he was firing Federal Reserve governor Lisa Cook, an unprecedented move that brings the president one step closer to shaping the balance of the Fed's seven-member board in his favor.

In a letter shared on Truth Social, Trump claimed "sufficient cause" to remove Cook immediately, pointing to accusations that Cook made false statements on mortgage agreements.

Cook said Aug. 26 the president lacked authority to oust her from the board of the central bank.

The move comes amid Trump's monthslong efforts to influence the Fed's decisions on interest rates. Trump had previously focused on pressuring Fed Chair Jerome Powell to lower rates through name-calling and termination threats, although he has since walked back threats to remove Powell.

Here's what to know:

Cook says Trump can't remove her

Cook, in a statement released by her lawyer, said of Trump that "no causes exist under the law, and he has no authority" to remove her from the job she was appointed to by former President Joe Biden in 2022.

"I will continue to carry out my duties to help the American economy," she said in a statement emailed to USA TODAY.

Abbe Lowell, Cook's attorney, said Trump's "demands lack any proper process, basis or legal authority. We will take whatever actions are needed to prevent this attempted illegal action."

Congressional Black Caucus slams Trump

“In the 111-year history of the Federal Reserve, no president has ever attempted to remove a governor of the central bank until now," the Congressional Black Caucus said in a statement torching Trump's moves to fire Cook from the Federal Reserve board.

"President Trump is attempting to oust Dr. Lisa Cook − the first Black woman to serve on the Federal Reserve Board − with no credible evidence of wrongdoing," the group said. "This is a blatant effort to distract from his failure to lower costs for Americans and a transparent attempt to install a loyalist at the central bank who will carry out his agenda without question."

Stock futures down after Trump moves to fire Fed governor

U.S. stock futures are lower after President Donald Trump fired Federal Reserve Governor Lisa Cook, saying she submitted fraudulent mortgage applications.

“I have determined that there is sufficient cause to remove you from your position,” Trump wrote in a letter to Cook posted on social media.

At 6:15 a.m ET, futures tied to the blue-chip Dow fell -0.14%, while broad S&P 500 futures slipped -0.08% and tech-heavy Nasdaq futures lost -0.06%.

--Medora Lee

What does Cook's firing mean for the Fed?

Cook's firing escalates Trump's efforts to reshape the Fed's makeup to his liking.

Governor Adriana Kugler, another Biden appointee, announced an early resignation in August. Trump nominated Stephen Miran, who chairs the White House’s Council of Economic Advisers, to serve the roughly six months remaining of Kugler's term, although Miran has yet to be confirmed by the Senate.

The board also has two Trump-appointed board members, Michelle Bowman and Christopher Waller, both of whom have expressed support for lower rates.

Powell, who was appointed by Trump as chair in 2017 and reappointed in 2022 under former President Joe Biden, is set to end his term as chairman in May 2026, although he could serve as a governor until 2028. Cook was nominated to the Fed's board of governors by Biden, along with board members Philip Jefferson and Michael Barr.

If Miran replaces Kugler and Cook is ousted from her seat, Trump's nominees would have a majority on the seven-person board.

The board members, along with the five presidents of the regional Federal Reserve banks, make up the Federal Open Market Committee, which decides the Fed's key interest rate.

Does this mean the Fed will lower interest rates in September?

Powell had already signaled that the Fed could move toward interest rate cuts soon.

The Fed adjusts interest rates to support its dual mandate of keeping prices stable and employment high. When inflation is high, the Fed can raise rates to make borrowing more expensive and cool economic activity. When unemployment is high, cutting rates can promote economic growth and hiring.

The Fed has kept rates steady since late 2024 amid concerns that tariffs could drive up consumer prices, but that could soon change. While the Fed has yet to commit to a rate cut, Powell on Aug. 22 said "the balance of risks appears to be shifting" as the downside risks to employment rise, which "may warrant adjusting our policy stance."

What does this say about the Fed's independence?

The central bank was established as an independent agency so that its decisions are based on what's best for the economy. Confidence in the Fed's autonomy could take a blow if the Fed bows down to a president's demands without a sound basis.

"The concern is the intent of the Trump administration: it's not to preserve Fed integrity, it's to install Trump's own people at the Fed," said Kyle Rodda, senior financial market analyst at Capital.com, of Cook's firing, as reported by Reuters. "It goes back to trust in institutions... It's another crack in the edifice of the United States and its investibility.

Analysts say that could erode the value of the U.S. dollar, which has already grown weaker this year.

"The dollar continues to weaken as American governance continues to erode," said Skanda Amarnath, executive director of think tank Employ America and a former Fed economist. "That means higher prices for all commodities."

What happens next?

Cook has previously said she has "no intention of being bullied to step down." After Trump asked her to resign on Aug. 20, Cook said she was gathering information to answer "any legitimate questions and provide the facts."

Contributing: Reuters

This article originally appeared on USA TODAY: Trump fires Reserve Governor Lisa Cook. What's next.

Reporting by Bailey Schulz, USA TODAY / USA TODAY

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