President Donald Trump posted a termination letter for Federal Reserve Board Governor Lisa Cook, alleging she made false statements on mortgage applications. The move could give Trump a 4-3 majority on the Fed Reserve Board if Cook is removed and replaced. This shift in power could lead to lower short-term interest rates and higher long-term rates, according to Krishna Guha, vice chairman of Evercore ISI.
Guha believes asset markets are not priced correctly for a potential breakup of Fed independence. His baseline scenario involves a “Trumpification” of the central bank, which could result in a look-through approach to inflation, more rapid rate cuts, and a stronger dollar. This could lead to a steeper yield curve, higher inflation risk premium, and weaker dollar.
Investors are already betting on lower short-term rates and higher long-term rates if the Fed becomes less attentive to inflation and economic data. The yield curve recently steepened, with long-term yields rising and short-term counterparts falling. However, Guha warns that equities may be vulnerable to a potential “riot in the bond market” due to Trump’s influence on the Fed, despite any short-term benefits from dovish policy.
Source: https://www.cnbc.com/2025/08/26/trump-risks-a-riot-in-the-bond-market-with-attempted-cook-firing-says-evercore-isis-guha.html