Why Federal Reserve has historically been independent

Trump wants to shake up the board, and that's concerning to economists, investors.

- BY CHRISTOPHER RUGABER

President Trump last week called on a Federal Reserve governor to resign over an accusation of mortgage fraud, the latest effort by his administration to exert greater control over one of the few remaining independent agencies in Washington.

Federal Reserve Gov. Lisa Cook says she won't leave her post.

Trump has repeatedly attacked the Fed's chair, Jerome H. Powell, for not cutting its short-term interest rate, and even threatened to fire him. Powell says the Fed wants to see how the economy responds to Trump's sweeping tariffs on imports, which Powell says could push up inflation.

Powell's caution has infuriated Trump, who has demanded the Fed cut borrowing costs to spur the economy and reduce the interest rates the federal government pays on its debt. Trump has also accused Powell of mismanaging the U.S. central bank's $2.5-billion building renovation project.

Firing the Fed chair or forcing out a governor would threaten the Fed's venerated independence, which has long been supported by most economists and Wall Street investors. Here's what to know about the Fed:

Why independence matters

The Fed wields extensive power over the U.S. economy. By cutting the short-term interest rate it controls — which it typically does when the economy falters — the Fed can make borrowing cheaper and encourage more spending, accelerating growth and hiring. When it raises the rate — which it does to cool the economy and combat inflation — it can weaken the economy and cause job losses.