Federal Reserve officials are once again signaling potential interest rate cuts.

Fed policymakers are currently releasing intensive "dovish" signals. On August 29th Eastern Time, San Francisco Federal Reserve President Mary Daly hinted that Fed decision-makers will soon cut interest rates. This statement further boosted expectations for Fed rate cuts, with the CME's "FedWatch Tool" showing the market currently betting on an 86.9% probability of a 25 basis point rate cut by the Fed in September.

At this critical moment, the "battle" between President Trump and the Federal Reserve is entering a heated phase. On August 29th Eastern Time, a hearing was held at a local court in Washington D.C. for Fed Governor Cook's lawsuit against Trump for her dismissal. Lawyers for plaintiff Cook and defendant Trump argued in court over whether Trump's reasons for dismissal were "justified."

**Latest Fed Officials' Statements**

On August 29th Eastern Time, San Francisco Federal Reserve President Mary Daly stated that Fed policymakers will soon be ready to lower interest rates, adding that inflationary pressures caused by tariff policies may only be temporary.

In a brief social media post shared by the San Francisco Fed that day, Daly wrote: "It's soon time to recalibrate policy to better match the economy. Price increases from tariffs will be one-time. It takes time to fully confirm this, but we cannot wait for perfect certainty, or we risk damaging the labor market."

Daly stated that Congress has given the Federal Reserve two mandates: full employment and price stability. Currently, there is tension between these two, with tariffs driving inflation higher while the labor market shows signs of slowing.

Daly's remarks echo Fed Chairman Powell's stance from last week—he has hinted at potential rate cuts as early as the September policy meeting, citing latest data showing a sharp slowdown in U.S. job growth.

Fed decision-makers are still trying to assess the economic impact of Trump's aggressive trade policy changes. Data released earlier Friday showed that U.S. consumer spending in July recorded its largest increase in four months, supporting signs of U.S. economic resilience.

According to the schedule, the Fed will hold its next interest rate meeting on September 16-17. According to the CME FedWatch tool, the market currently bets on a 86.9% probability that policymakers will cut rates by 25 basis points, with a 13.1% probability of maintaining the status quo.

This year, the Federal Reserve has already kept rates unchanged for five consecutive meetings, partly due to risks of renewed inflation triggered by President Trump's aggressive tariff measures.

Notably, the prospects for Trump's tariff policies suddenly face uncertainty. According to CCTV News, on August 29th local time, a U.S. appeals court ruled that most of Trump's global tariff policies were illegal. The court stated that these additional tariff measures can remain in place until October 14th to allow the U.S. government to appeal to the Supreme Court.

Trump criticized the appeals court ruling through social media that day, calling it "wrong" to demand tariff removal and emphasizing that existing tariffs remain in effect. Trump stated that if tariffs were removed, "it would bring complete disaster to America."

**Trump vs Federal Reserve Battle Begins**

On August 29th Eastern Time, a hearing was held at a local court in Washington D.C. for Fed Governor Cook's lawsuit against Trump for her dismissal. This means the court battle that will determine whether Trump can achieve unprecedented control over Fed monetary policy has begun.

In court documents submitted before the hearing, the U.S. Department of Justice stated that Congress has given the president discretionary power, and courts should respect Trump's judgment on whether there are sufficient "just cause" grounds for dismissing Cook. In other words, the Trump administration believes that defining reasons is a presidential prerogative that courts cannot review. As long as the president determines that misconduct allegations constitute reasonable grounds for dismissing her, that is sufficient.

The Trump administration insists that Cook was allegedly involved in mortgage fraud before joining the Federal Reserve, constituting "just cause" for her dismissal.

Cook's lawyer Abbe Lowell countered that social media posts by Trump administration officials cannot be used as grounds for dismissal, calling it an "obvious smear campaign" with politically motivated charges against Cook. The allegations are unsubstantiated and gave Cook no opportunity to refute them. Even if the alleged fraudulent behavior were true, it occurred before she served as a governor and is insufficient grounds for dismissal.

According to media reports, after Trump announced Cook's dismissal, Cook retained access to Federal Reserve offices and equipment, though it's unclear whether she has personally returned to her office.

Documents show that Cook's request for a temporary restraining order (TRO) to prevent her dismissal should be denied because her claim that Trump illegally fired her without necessary "just cause" is "extremely unlikely to succeed on the merits."

Justice Department lawyers noted in documents that Cook has "not even now provided an explanation" for the mortgage allegations.

The Federal Reserve stated in submitted court documents that it would not comment on Cook's request to temporarily block her dismissal but hopes the judge will "rule quickly" to resolve the dispute.

According to Cook's lawyer, the Federal Reserve does not plan to "take any action today" and will not act before the court ruling. This effectively maintains the status quo—Cook continues to retain her governor position.

After the hearing, Judge Cobb made no ruling, giving both sides' lawyers the opportunity to provide supplementary materials. Apart from requiring Cook's lawyers to submit documents by next Tuesday, no specific deadlines were set.

If Trump successfully dismisses Cook and nominates a new governor as replacement, his nominees would constitute a majority in the seven-member Federal Reserve Board of Governors, totaling four people, giving him substantial control over interest rate decisions. Trump has stated that after replacing Cook, a majority of Fed board members would support his desire for significant rate cuts.