How the Fed losing its independence could affect Americans’ everyday lives

WASHINGTON (AP) — President Donald Trump's attempt to fire a member of the Federal Reserve's governing board has raised alarms among economists and legal experts who see it as the biggest threat to the central bank's independence in decades.

The consequences could impact most Americans' everyday lives: Economists worry that if Trump gets what he wants — a loyal Fed that sharply cuts short-term interest rates — the result would likely be higher inflation and, over time, higher borrowing costs for things like mortgages, car loans and business loans.

Trump on Monday sought to fire Lisa Cook, the first Black woman appointed to the Fed's seven-member governing board. It was the first time in the Fed's 112-year history that a president has tried to fire a governor.

Trump said he was doing so because of allegations raised by one of his appointees that she has committed mortgage fraud.

Cook has argued in a lawsuit seeking to block her firing that the claims are a pretext for Trump's true goal: Gaining more control over the Fed. A court may decide next week whether to temporarily block Cook’s firing while the case makes its way through the legal process.

Cook is accused of claiming two homes as primary residences in July 2021, before she joined the board, which could have led to a lower mortgage rate than if one had been classified as a second home or an investment property. She has suggested in her lawsuit that it may have been a clerical error but hasn’t directly responded to the accusations.

Trump and members of his administration have made no secret about their desire to exert more control over the Fed. Trump has repeatedly demanded that the central bank cut its key rate to as low as 1.3%, from its current level of 4.3%.

Before trying to fire Cook, Trump repeatedly attacked the Fed’s chair, Jerome Powell, for not cutting the short-term interest rate and threatened to fire him as well.

“We’ll have a majority very shortly, so that’ll be good,” Trump said Tuesday, a reference to the fact that if he is able to replace Cook, his appointees will control the Fed's board by a 4-3 vote.

“The particular case of Governor Cook is not as important as what this latest move shows about the escalation in the assaults on the Fed,” said Jon Faust, an economist at Johns Hopkins and former adviser to Powell. “In my view, Fed independence really now hangs by a thread.”

Some economists do think the Fed should cut more quickly, though virtually none agree with Trump that it should do so by 3 percentage points. Powell has signaled the Fed is likely to cut by a quarter point in September.

The Fed wields extensive power over the U.S. economy. By cutting the short-term interest rate it controls — which it typically does when the economy falters — the Fed can make borrowing cheaper and encourage more spending, growth, and hiring. When it raises the rate to combat the higher prices that come with inflation, it can weaken the economy and cause job losses.

Most economists have long preferred independent central banks because they can take unpopular steps that elected officials are more likely to avoid. Economic research has shown that nations with independent central banks typically have lower inflation over time.

Elected officials like Trump, however, have much greater incentives to push for lower interest rates, which make it easier for Americans to buy homes and cars and would boost the economy in the short run.

Douglas Elmendorf, an economist at Harvard and former director of the nonpartisan Congressional Budget Office, said that Trump's demand for the Fed to cut its key rate by 3 percentage points would overstimulate the economy, lifting consumer demand above what the economy can produce and boosting inflation — similar to what happened during the pandemic.

“If the Federal Reserve falls under control of the president, then we’ll end up with higher inflation in this country probably for years to come,” Elmendorf said.

And while the Fed controls a short-term rate, financial markets determine longer-term borrowing costs for mortgages and other loans. And if investors worry that inflation will stay high, they will demand higher yields on government bonds, pushing up borrowing costs across the economy.

In Turkey, for example, President Recep Tayyip Erdogan forced the central bank to keep interest rates low in the early 2020s, even as inflation spiked to 85%. In 2023, Erdogan allowed the central bank more independence, which has helped bring down inflation, but short-term interest rates rose to 50% to fight inflation, and are still 46%.

Other U.S. presidents have badgered the Fed. President Lyndon Johnson harassed then-Fed Chair William McChesney Martin in the mid-1960s to keep rates low as Johnson ramped up government spending on the Vietnam War and antipoverty programs. And Richard Nixon pressured then-Chair Arthur Burns to avoid rate hikes in the run-up to the 1972 election. Both episodes are widely blamed for leading to the stubbornly high inflation of the 1960s and '70s.

Trump has also argued that the Fed should lower its rate to make it easier for the federal government to finance its tremendous $37 trillion debt load. Yet that threatens to distract the Fed from its congressional mandates of keeping inflation and unemployment low.

Presidents do have some influence over the Fed through their ability to appoint members of the board, subject to Senate approval. But the Fed was created to be insulated from short-term political pressures. Fed governors are appointed to staggered, 14-year terms to ensure that no single president can appoint too many.

Jane Manners, a law professor at Fordham University, said there is a reason that Congress decided to create independent agencies like the Fed: They preferred “decisions that are made from a kind of objective, neutral vantage point grounded in expertise rather than decisions are that are wholly subject to political pressure.”

Yet some Trump administration officials say they want more democratic accountability at the Fed.

In an interview with USA Today Vice President JD Vance said, “What people who are saying the president has no authority here are effectively saying is that seven economists and lawyers should be able to make an incredibly critical decision for the American people with no democratic input.”

And Stephen Miran, a top White House economic adviser, wrote a paper last year advocating for a restructuring of the Fed, including making it much easier for a president to fire governors.

The “overall goal of this design is delivering the economic benefits” of an independent central bank, Miran wrote, “while maintaining a level of accountability that a democratic society must demand." Trump has nominated Miran to the Fed's board to replace Adriana Kugler, who stepped down unexpectedly Aug. 1.

Trump has personally insulted Powell for months, but his administration now appears much more focused on the Fed’s broader structure.

The Fed makes its interest rate decisions through a committee that consists of the seven governors, including Powell, as well as the 12 presidents of regional Fed banks in cities such as New York, Kansas City, and Atlanta. Five of those presidents vote on rates at each meeting. The New York Fed president has a permanent vote, while four others vote on a rotating basis.

While the reserve banks' boards choose their presidents, the Fed board in Washington can vote to reject them. All 12 presidents will need to be reappointed and approved by the board in February, which could become more contentious if the board votes down one or more of the 12 presidents.

“The nuclear scenario is ... the reappointment of the reserve bank presidents and interfering with that, (which) would be the signal that things are truly going off the rails," said Adam Posen, president of the Peterson Institute for International Economics.

FILE - President Donald Trump visits the Federal Reserve during renovations, July 24, 2025, in Washington. (AP Photo/Julia Demaree Nikhinson)

FILE - Federal Reserve Chairman Jerome Powell, and Board of Governors member Lisa Cook, right, listen during an open meeting of the Board of Governors at the Federal Reserve, June 25, 2025, in Washington. (AP Photo/Mark Schiefelbein, File)

FILE- In this Feb. 5, 2018, file photo, the seal of the Board of Governors of the United States Federal Reserve System is displayed in the ground at the Marriner S. Eccles Federal Reserve Board Building in Washington. (AP Photo/Andrew Harnik, File)

DALLAS (AP) — Sen. John Cornyn stood in the shadow of the U.S.-Mexico border wall for a campaign event, but the Texas Republican didn’t offer the kind of diatribe about illegal immigration that stokes his party’s core and fueled Donald Trump’s rise to the White House.

Instead, Cornyn, in his courtly Houston drawl, politely thanked Trump for billions in federal dollars to reimburse Texans for work on the wall, praising “the president of the United States, to whom I am very grateful.”

Cornyn's characteristic calm and measured comments betrayed the urgency of the moment for the four-term senator. He's facing the political fight of his long career against two Republicans who claim closer ties to Trump and his MAGA movement and tend more toward fiery rhetoric. Now, Cornyn could become the first Republican Texas senator to lose renomination in a race that may reflect what GOP primary voters are looking for in their elected officials — and what it takes to survive in Trump’s Republican Party.

Some say the 73-year-old former Texas Supreme Court justice represents a bygone era in the GOP. Still, Cornyn, supporters and the Senate’s Republican leadership are fighting aggressively for an edge in the March 3 primary. They have spent tens of millions of dollars, much of it against his opponents, Attorney Gen. Ken Paxton and Rep. Wesley Hunt — both self-styled Trump Republicans.

“We’ve got enough performance artists here in Washington,” Cornyn told The Associated Press, “people who think serving as a representative in the world’s most distinguished representative body — that what qualifies them — is they are loud, they are active on social media and they get a lot of attention.”

Paxton entered the race in April, having emerged from legal troubles that had shadowed his political rise, including beating a 2023 impeachment trial on corruption charges and reaching a deal to end a long-running securities fraud case.

The three-term attorney general has portrayed the investigations against him as persecution by the political establishment, much like Trump has. He contends Cornyn has “completely lost touch with Texas.”

Hunt is still working to raise his profile in Texas. The two-term House member often touts his early endorsement of Trump's 2024 comeback campaign.

Of Cornyn, Hunt recently said, “His moment has passed.”

Hunt's entry in the race last fall made it more likely that no candidate will win at least 50% of the primary vote, sending the top two finishers to a May runoff. The nominee would face the winner of the Democratic primary between Rep. Jasmine Crockett and state Rep. James Talarico.

Mike Fleming, an 80-year-old retired sales manager who attended a recent Hunt campaign event, said Cornyn is a good man but has spent “a lot of his time trying to run for head of the Senate.” Cornyn unsuccessfully ran for Senate majority leader after the 2024 elections.

“If he was the only guy, I would vote for him,” Fleming said.

Cornyn and aligned super PACs have heavily outspent Paxton and Hunt, investing more than $30 million since last summer on television advertising, much of it criticizing his rivals, according to the ad-tracking service AdImpact.

Senate Republican leaders, however, have worried that Paxton, as the nominee, would be costly to defend in the general election. Cornyn's situation is more about a shift in Republican campaign priorities and what candidates need to do to win a GOP primary.

“He plays the part of the distinguished statesman. And that’s what he’s always been,” said Wayne Hamilton, a former executive director of the Texas Republican Party. “But anymore, you have to be very loud about the opposition. And that’s just not him.”

Cornyn also fights a perception among some GOP voters that he’s a moderate.

“He hasn’t been consistent in his conservative representation in his voting,” said Robyn Richardson, 50, from suburban Dallas.

Some Texas conservatives remain angry about Cornyn's work as the GOP’s negotiator on gun restrictions in a 2022 law in the weeks after the shooting at Robb Elementary School in Uvalde, Texas, where 19 students and two teachers were killed. Democrats narrowly controlled Congress and hoped to enact major changes under President Joe Biden.

The measure didn't go as far as Democrats wanted, but the bipartisan bill was the widest-ranging gun measure passed by Congress in decades. Some Republicans wanted any bill blocked, and a week before its passage, some GOP activists booed Cornyn as he took the stage at a state convention.

Some point to Cornyn being dismissive of Trump during his 2016 campaign and before his 2024 campaign and to his dismissal of Trump's claims of widespread election fraud after he lost to Biden in 2020. Those claims by Trump were debunked.

Cornyn was even skeptical early on about the border wall he took credit for helping finance, calling Trump “naive” in proposing it before he sealed the 2016 Republican presidential nomination. Paxton has pointed to that comment, portraying Cornyn as “opposing the border wall.”

The episodes certainly weren't helpful for Cornyn, who has worked to show Texas Republicans where he and Trump agree.

Cornyn aired ads featuring him with Border Patrol agents along the wall, promoting his support to secure $11 billion for Texans' work on it. Another ad promoted Cornyn's 99% support for Trump's agenda, including his three U.S. Supreme Court nominees.

But the disagreements are small compared with the broader shift Cornyn has resisted.

Vinny Minchillo, a veteran Republican consultant in the Dallas area, referred to Cornyn as “an old George W. Bush Republican, which is now a bad thing” since Trump’s rise.

Cornyn was elected attorney general in 1998, winning when a new national conservative figure was rising out of Texas, the newly reelected Gov. George W. Bush, who was elected president two years later.

The Bush name, once a three-generation fixture in Texas politics, quietly disappeared when then-Texas Land Commissioner George P. Bush, grandson and nephew of two presidents, lost his challenge of Paxton for attorney general in 2022.

“I think there is certainly some level of John Cornyn fatigue,” Minchillo said. “He’s been on the ballot in Texas for a long, long time.”

As of last week, Trump had endorsed dozens of Republican lawmakers in Texas. But he is not expected to endorse ahead of the Senate primary, according to people familiar with the White House thinking but who were not authorized to speak publicly.

That would leave Cornyn among only three incumbent Republican senators seeking reelection who have not received Trump's public backing, with Maine's Susan Collins and Louisiana's Bill Cassidy.

Cornyn acknowledged he's “not somebody who cries out for attention at every opportunity.”

Instead, in the final weeks of the primary campaign, he's hoping voters consider which candidate would be the most effective at getting things done — because he believes they'll support him if they do.

“Sometimes people make the distinction between a workhorse and a show horse,” he said. “And I’m happy to be a workhorse.”

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Beaumont reported from Des Moines, Iowa. Hanna reported from Topeka, Kan. Maya Sweedler contributed from Washington.

Sen. John Cornyn, R-Texas, walks through the Capitol, Thursday, Jan. 15, 2026, in Washington. (AP Photo/Allison Robbert)

FILE - Sen. John Cornyn, R-Texas, introduces Brooke Rollins during a Senate Agriculture, Nutrition, and Forestry Committee hearing on her nomination for Secretary of Agriculture, Jan. 23, 2025, in Washington. (AP Photo/Jacquelyn Martin, File)