Key facts
- The Supreme Court is expected to rule on whether Fed Governor Lisa Cook can be fired by President Donald Trump.
- Trump's administration argued Cook's alleged misstatements on a mortgage application justified her removal.
- Fed governors can only be fired 'for cause,' a legal standard that has not been tested in court.
- A ruling protecting Cook would insulate Fed policymakers from political interference and potential removal.
- Fed Chair Kevin Warsh plans to avoid providing forward guidance on interest rate policy.
- Warsh will participate in a panel discussion at the ECB's annual forum in Sintra, Portugal.
Federal Reserve Chairman Kevin Warsh's early tenure is set to be tested by significant events this week, including a crucial U.S. Supreme Court ruling on Fed Governor Lisa Cook's job and his own appearance at a high-profile European Central Bank conference.
The Supreme Court is expected to decide whether President Donald Trump can fire Cook, who is challenging the dismissal. Lower courts have suggested Cook has a strong case, as Fed governors can only be removed 'for cause,' a standard Trump's administration is attempting to define and apply. This case is seen as a test of the Fed's independence from political interference, particularly as Trump has expressed frustration with the central bank's interest rate policies.
A ruling in Cook's favor would likely protect Fed policymakers from arbitrary removal, easing a potential risk for Warsh and reinforcing the central bank's autonomy. This comes as recent inflation data suggests the Fed may need to raise rates, a move contrary to Trump's stated desires.
Warsh himself will face scrutiny at the ECB's annual forum in Sintra, Portugal, where he will share a panel with ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem. Warsh has signaled a preference for avoiding explicit 'forward guidance' on monetary policy, a stance that will be observed by global peers and markets.
Comments from Trump and Treasury Secretary Scott Bessent have been more measured towards Warsh compared to former Fed Chair Jerome Powell. Trump has stated he wants Warsh to act independently. Warsh's approach of limiting forward guidance, which he argues allows markets to react to economic conditions, has already been implemented in the Fed's new policy statement.