{"id":112575,"date":"2025-08-27T01:02:10","date_gmt":"2025-08-27T01:02:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/112575\/"},"modified":"2025-08-27T01:02:10","modified_gmt":"2025-08-27T01:02:10","slug":"threat-to-feds-cook-spurs-inflation-worry","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/112575\/","title":{"rendered":"Threat to Fed\u2019s Cook Spurs Inflation Worry"},"content":{"rendered":"

(Bloomberg) — Long-dated US Treasuries were lagging the market and retained modest losses as President Donald Trump intensified efforts to oust Federal Reserve Governor Lisa Cook, deepening concerns his attacks on the central bank\u2019s independence and lobbying for lower interest rates will fan inflation.<\/p>\n

The yield on 30-year bonds rose as much as five basis points to 4.94%, before trimming advance. In contrast, the two-year yield fell five basis points to a session low of 3.67% after a well received $69 billion auction at 1pm in New York.\u00a0<\/p>\n

While the moves were relatively small, investors and strategists were speculating in their morning trading notes that price pressures may heat up if Trump succeeds in replacing Cook with a policymaker more inclined to lower borrowing costs. The President has repeatedly complained that Fed Chair Jerome Powell and his colleagues have been too slow to cut rates.\u00a0<\/p>\n

\u201cThe President is going to remake the Board Governors of the Federal Reserve over the next year, and he\u2019s doing so in very unconventional ways,\u201d said Jamie Cox, managing partner for Harris Financial Group. That approach has \u201cessentially usurped\u201d the Fed\u2019s forward guidance function for now, telling markets lower rates are coming, he added.\u00a0<\/p>\n

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Trump sought to remove Cook following allegations she falsified documents on a mortgage application. Cook said she will not resign and disputed Trump\u2019s authority to fire her.<\/p>\n

Related:AMT: One Big Beautiful Opportunity in the Municipal Bond Market<\/a><\/p>\n

The push to dismiss Cook \u201cis a good reminder that no institution in Washington can insulate itself from Trump\u2019s bullying,\u201d said Sarah Binder, political science professor at George Washington University. \u201cNor are claims of \u2018independence\u2019 sufficient to protect the Fed from Trump\u2019s ambitions. The Fed needs defenders, especially bond traders.\u201d<\/p>\n

What Bloomberg Strategists Say<\/p>\n

\u201cThe more the Fed cuts rates, the greater the threat that longer-dated yields will stay higher. It\u2019s one thing to loosen policy in the face of well-entrenched disinflation, but quite another when price increases are running above target inflation.\u201d<\/p>\n

\u2014Ven Ram, Macro Strategist. Click here to read the full analysis.<\/p>\n

Read more:\u00a0Trump Moves to Fire Fed\u2019s Cook, Setting Up Historic Legal Fight<\/a><\/p>\n

Pressure on Cook follows an aggressive campaign by Trump to force Powell \u2014 whose term as Chair expires in May \u2014 to stand down early, with the search for his replacement already underway. Trump appointed Council of Economic Advisers Chairman Stephen Miran, a long-time supporter, to serve the expiring term of Fed Governor Adriana Kugler, who resigned early this month.\u00a0<\/p>\n

Related:Takeaways from Day One at the Morningstar Investment Conference<\/a><\/p>\n

Two-year yields, which are among the most sensitive to monetary policy, were lower befor the auction amid speculation the Fed will cut interest rates as soon as next month. The gap between five and 30-year US yields widened seven basis points to 117 basis points \u2014 the steepest since 2021.\u00a0<\/p>\n

While the short-end is gaining on the potential for a \u201cmore dovish replacement\u201d for Cook, the long-end yield is \u201chigher on the inflationary potential of that and the loss of Fed independence,\u201d said John Briggs, head of US rates strategy at Natixis North America.<\/p>\n

While the Fed has yet to lower borrowing costs this year, Powell used his speech at the Jackson Hole symposium last week to indicate a rate cut may be warranted to support the labor market. On Monday, Federal Reserve Bank of New York President John Williams said the era of low neutral interest rates \u201cappears\u00a0far from over<\/a>.\u201d<\/p>\n

Simmering tensions<\/p>\n

The latest development comes as tensions continue to simmer over the US budget deficit after the House\u00a0passed<\/a>\u00a0a $3.4 trillion fiscal package that cuts taxes and curtails spending on safety-net programs. Traders will be watching to see how this week\u2019s Treasury auctions, which include five- and seven-year tenors, are received by market participants.\u00a0<\/p>\n

Related:Seven Bond Myths Every Advisor Should Know<\/a><\/p>\n

When S&P Global Ratings recently\u00a0affirmed the AA+ credit score\u00a0<\/a>of the US, it warned that the country\u2019s ratings \u201ccould come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Federal Reserve.\u201d<\/p>\n

After falling sharply in the first half of the year, the dollar has largely stabilized since June. But fresh questions over Fed autonomy may test that recent resilience. The Bloomberg Dollar Spot Index dipped 0.2% on Tuesday. \u00a0<\/p>\n

\u201cChallenges to Fed independence pose clear downside risks to the dollar in our view, owing in this case to both concerns around US institutions, and to the read-through to lower front-end US yields,\u201d Goldman Sachs Group Inc. strategists including Stuart Jenkins wrote in a note.\u00a0<\/p>\n

\u00a9\u00a02025\u00a0Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — Long-dated US Treasuries were lagging the market and retained modest losses as President Donald Trump intensified…\n","protected":false},"author":2,"featured_media":112576,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101],"class_list":["post-112575","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/112575","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=112575"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/112575\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/112576"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=112575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=112575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=112575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}