LEILA FADEL, HOST:
President Trump is meeting some resistance in his attempt to fire a member of the Federal Reserve's Board of Governors.
A MARTÍNEZ, HOST:
The Supreme Court heard arguments in a case about Fed Governor Lisa Cook on Wednesday and had tough questions for the president's lawyer. Trump has been critical of the Fed for not lowering interest rates more aggressively.
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PRESIDENT DONALD TRUMP: We should be paying a much lower interest rate than we are. We should be paying the lowest interest rate of any country in the world because without the United States, you don't have a country.
MARTÍNEZ: Politicians often want lower interest rates to boost the economy before the next election, but Trump has gone to extraordinary lengths to push the central bank in that direction.
FADEL: NPR's Scott Horsley joins us now to discuss. Hey, Scott.
SCOTT HORSLEY, BYLINE: Good morning.
FADEL: So the Supreme Court heard arguments on Wednesday over Trump's attempt to fire Fed Governor Lisa Cook. How did it go?
HORSLEY: This Supreme Court has generally given Trump a lot of latitude to fire officials from other independent agencies like the Federal Trade Commission, but justices have signaled the Federal Reserve is a special case, and Lisa Cook's lawyer, Paul Clement, really stressed that during oral arguments yesterday. He said Congress deliberately set up the Fed to be insulated from political pressure, and Clement said for more than a century, other presidents have generally respected those boundaries.
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PAUL CLEMENT: No president, from Woodrow Wilson to Joseph Biden, has ever even tried to remove a governor for cause, despite the ever present temptation for lower rates and easier money.
HORSLEY: The whole idea is the Fed sometimes has to make decisions that are unpopular in the short run - like keeping interest rates high to fight inflation - in order to achieve the best economic outcome in the long run.
FADEL: Are interest rates the reason Trump wants to fire Cook?
HORSLEY: Not the stated reason. Trump and his allies have accused Cook of making false statements on mortgage applications, although she denies any wrongdoing. Justices seem skeptical that Cook could be dismissed over that without having any opportunity to make her own case. Justice Brett Kavanaugh suggested if the bar for firing a Fed governor were set that low, it would weaken or shatter the central bank's independence.
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BRETT KAVANAUGH: If this were set as a precedent, it seems to me what goes around comes around. All the current president's appointees would likely be removed for cause on January 20, 2029, if there's a Democratic president or January 20, 2033. Then where are we?
HORSLEY: So far, courts have allowed Cook to keep her job at the Fed while this case plays out.
FADEL: The Fed has been cutting interest rates but not as quickly as the president would like. Where does the central bank go from here?
HORSLEY: Most forecasters think the Fed's going to hold interest rates steady when policymakers meet next week. They have cut rates three times since last September, out of concern over the softening job market. But, you know, inflation is still higher than the Fed would like, and policymakers have signaled they're going to be cautious about additional rate cuts going forward. Now, Trump has not only tried to fire Cook, he's threatened to fire the Fed chairman, Jerome Powell. And the Justice Department even launched an investigation of the central bank. But all that pressure could be backfiring. Powell, who attended yesterday's Supreme Court hearing, said in a video statement this month, he and his colleagues will not be bullied.
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JEROME POWELL: This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions, or whether instead monetary policy will be directed by political pressure or intimidation.
HORSLEY: Now, Powell's term as Fed chairman ends in May, but he has the option to keep his seat on the Fed's governing board for another couple of years. He hasn't said whether he'll do so, but if he did, that would deny Trump the opportunity to appoint another more compliant Fed governor.
FADEL: NPR's Scott Horsley. Thank you, Scott.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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