You might think investors would be used to President Trump’s idiosyncratic interventions, especially given his constant haranguing of Federal Reserve chair Jerome Powell for not having cut interest rates at his bidding.

Yet the move to fire Fed Governor Lisa Cook, following allegations she falsified mortgage documents, represents a major escalation in the administration’s efforts to exert greater influence over what should be a politically neutral body.

‘Under the banner of boosting growth, Trump has threatened to fire Powell and other Fed officials in an effort to curb the central banking independence that has underpinned America’s economic foundations for more than half a century,’ commented the Financial Times.

The move comes on the heels of the firing of the head of the Bureau of Labour Statistics, following a significant downgrade to the employment statistics, raising doubts about the authenticity of future economic data which, among other things, is a major input in the Fed’s thinking on interest rate policy.

In a letter posted on social media, Trump claimed he had ‘sufficient cause’ to sack Cook, who was appointed by President Biden in 2022, accusing the Fed board member of ‘deceitful and possibly criminal conduct in a financial matter’.

Forcing out Cook, whose term is not due to expire until 2038, would give Trump the opportunity to install someone more sympathetic and tip the balance in his favour on the Fed’s seven-strong Board of Governors.

As well as sending the dollar lower, the White House’s attack sent stocks and bonds lower on 25 August while the gold price gained.

‘This is a kill shot at Fed independence’, said Aaron Klein, a senior fellow at the Brookings Institution, in an interview with Bloomberg.

‘Trump is saying the Fed is going to do what he wants it to do, by hook or by crook.’

European markets were dealing with their own mini-crisis after French prime minister Francois Bayrou scheduled a vote of confidence in the government for 8 September as doubts grow over the country’s ability to push through its plan to reduce the budget deficit.

Shares in major French banks and companies in the energy and infrastructure sectors fell as investors began to question the durability of long-term government investment plans.

The sell-off also impacted other European countries, reigniting the debate as to whether Europe’s major economies can manage their debt burdens at a time of slowing growth and fracturing global trade in an increasingly ‘multi-polar’ world.

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