• President Trump is pressuring the Federal Reserve to lower interest rates.
• Jerome Powell's speech at Jackson Hole is anticipated as key for financial markets.
• Fed independence is vital to maintain economic stability, argue economists.
• Trump's attacks include calls for the resignation of Fed Governor Lisa Cook.
• Market analysts expect potential changes to Fed policy in the near future.

The battle over the independence of the US Federal Reserve has intensified as President Donald Trump publicly called for the resignation of Fed governor Lisa Cook over an allegation of mortgage fraud. This comes as he also threatens to fire Chair Jerome Powell for his refusal to cut interest rates, which Trump claims are hindering economic growth. The Fed has maintained its key interest rate at 4.25%-4.5% as it assesses the impact of Trump's tariffs on inflation and economic growth, which has become a matter of significant concern ahead of Powell's upcoming speech at the Jackson Hole economic symposium, according to Indiatimes and Los Angeles Times.

Powell's speech is especially crucial as it may address the conflicting signals from the economy, with hiring slowing sharply even as inflation remains elevated. Trump has ratcheted up pressure on Powell to cut rates, arguing that it would help boost economic performance and lower government debt payments. The Fed's cautious approach stems from a dual mandate to foster maximum employment while maintaining stable prices, putting Powell in a tight spot as he weighs the risk of inflation against the need for economic stimulus, according to ABC News and Los Angeles Times.

Historically, the independence of the Fed has been crucial for stabilizing markets and managing inflation, particularly noted during the inflation crisis of the 1970s. Economists argue that a politically controlled Fed could lead to unpredictable decisions that may worsen economic instability. The current pressures from Trump, including his public complaints about the Fed's operational costs, threaten this independence, which Wall Street heavily relies upon for predictability in policy decisions. Powell’s upcoming address is seen as a pivotal moment to reaffirm the Fed's commitment to its long-standing independence amidst this ongoing political pressure, according to Indiatimes, ABC News, and Los Angeles Times.

Legal experts note that while Trump has threatened to fire Powell, he would likely only be able to do so for "cause," such as misconduct or negligence, which complicates his plans. Notably, Trump's focus on Powell's management of the Fed's $2.5 billion building renovation project appears to be an attempt to find a justifiable reason for dismissal. However, even with administrative changes, the committee that sets interest rates comprises 12 members who may resist any overtly political moves, preserving the Fed's independence, according to Indiatimes and ABC News.