Why can this industry make the US economy rattle

Donald Trump said he was firing Fed Gov. Lisa Cook.

She said she would not go anywhere – she was threatening legal action.

No one knows how this will unfold, or whether it can end in the U.S. Supreme Court.

Obviously, this is very unusual – and raises serious questions about the independence of the US central bank.

For months, the U.S. president has been piling up pressure on the Fed to lower interest rates to make the U.S. economy more expensive and make government borrowing cheaper.

He repeatedly targeted Fed Chairman Jay Powell, calling him everything from “too late” to “Numbskull.”

It’s dramatic – but not completely new. The president has been with the Fed for decades. In the 1960s, President Lyndon Johnson pushed his Fed chair against the wall while controversing the rate.

The difference now is that Trump is not just attacking Powell — he wants to shake the entire Fed committee and replace it to share his political views. This is what puts economists and investors on the edge.

The Federal Reserve (or just the “Fed”) has existed since 1913.

Since the late 1970s, it has two main goals: keeping prices stable and helping as many Americans as possible find jobs.

Crucially, it is independent. This means it can raise or lower interest rates without the approval of Congress or the president, even if it upsets politicians.

As economist Claudia Sahm said, the Fed’s independence exists when political leaders want policies that higher tariffs may reduce growth and increase inflation.

Turning politics toward monetary policy can be risky.

It may feel good to lower interest rates at the beginning – an economical sugar.

But over time, it can lead to inflation, market instability and higher costs for borrowers.

In 2010, Federal Reserve Chairman Ben Bernanke warned that political intervention could create a devastating “prosperity and bankruptcy” cycle and make inflation harder to control.

This is not only a domestic issue.

Investors around the world rely on the Federal Reserve and U.S. fiscal bonds as financial havens.

If they start to doubt the Fed’s credibility, then the U.S. government’s borrowing costs could rise – which would have a ripple effect globally as they are used to determine the price of global assets.

So far, financial markets seem to be strideing forward.

But that may change soon.

The Fed’s ability to act independently has long been seen as the cornerstone of U.S. economic stability.

The concern now is that, like many other specifications, there may be a risk of being swept away.