Federal Reserve governor Lisa Cook sued President Trump on Thursday, seeking to block his move to fire her from the central bank. The lawsuit tees up a high-stakes court battle over the president’s authority to remove members of the Fed's board. On the data front, the U.S. economy grew at a faster pace than previously thought in the second quarter, helped by healthy consumer spending and signs of spending on the booming AI sector. Focus now turns to the release of the personal-consumption expenditures index, the Fed's preferred measure of inflation. Investors will eye the data for clues as to the likelihood of a September rate cut. Fed Governor Christopher Waller on Thursday said he would back a quarter point interest rate cut in September, with a bigger cut unnecessary based on current data.

The Central Banking newsletter will be taking a break on Monday for the Labor Day holiday in the U.S. We'll be back on Tuesday.

Federal Reserve governor Lisa Cook sued President Trump on Thursday, seeking to block his move to fire her from the central bank, in an unprecedented legal battle testing the president’s power over the independent central bank’s seven-member board.

The lawsuit filed in Washington, D.C., federal district court alleges Trump violated the law by attempting to remove Cook from her post without a valid reason.

Waller had urged the Fed to cut rates at its last meeting in July, and he said he is more sure now that it was the right call. “Let’s get on with it,” Waller said Thursday at an event in Miami. The White House has said Waller is among the list of candidates who will be interviewed for the job to replace Fed Chair Jerome Powell, when Powell’s term ends in May. (MarketWatch)

Gross domestic product expanded at a seasonally and inflation-adjusted annual rate of 3.3% in the second quarter, the Commerce Department said in an updated estimate Thursday. The department had previously said the economy grew by 3%. The economy’s growth reflected in part a drop in imported goods after companies front-loaded purchases earlier in the year to get ahead of new tariffs. Trade can cause swings in quarterly growth because of the way GDP is calculated.

Factory activity in the central U.S. continued its slow rebound as demand improved, with price pressures also gaining pace as the Federal Reserve mulls a cut in interest rates. The Federal Reserve Bank of Kansas City said Thursday that its Tenth District manufacturing survey’s composite index was steady at 1.0 this month, maintaining the same level as July

9:45 a.m.: Chicago Business Barometer - ISM-Chicago Business Survey - Chicago PMI
10 a.m.: University of Michigan Survey of Consumers - final
7 p.m.: U.S. global tariff exemption for low-cost goods ends

U.S. Labor Day. Financial markets closed

Falling mortgage rates have pushed the median U.S. monthly mortgage payment down to $2,616, its lowest level since the start of the year, according to Redfin. Lower housing costs are bringing some house hunters off the sidelines. Pending home sales rose 1.6% year over year during the four weeks ending Wednesday. That marks two straight months of increases in pending sales after they fell for most of 2025. But many buyers are still waiting on the sidelines. A lot of prospective buyers are waiting to see if the Fed cuts interest rates in September to buy. But Redfin economists say today's mortgage rates likely already reflect the upcoming rate cut. On the selling side, new listings are up 1.9% year over year. — Chris Wack

Expectations for interest-rate cuts by the Bank of England look too conservative and this leaves sterling vulnerable, UBS Global Wealth Management's head of global foreign exchange and commodities Dominic Schnider said. The U.K.'s challenging fiscal situation means growth and inflation could undershoot consensus forecasts and lead to more rate cuts than markets anticipate, Schnider said. The BOE only narrowly approved a rate reduction at its latest meeting on August 7, stressing the risk of inflation rising and reiterating its guidance for "gradual and careful" policy easing. This prompted markets to scale back expectations for further rate cuts. U.K. money markets are now only pricing a 39% chance of another rate reduction by year-end, LSEG data show. — Renae Dyer

• New tariffs aimed at raising revenue and blocking the flow of counterfeit goods and fentanyl into the U.S. could raise as much as $10 billion a year, U.S. trade advisor Peter Navarro told reporters Thursday. (Barron's)
• The European Union will move to eliminate all tariffs on U.S. industrial imports and expand access for American farm products, part of an effort to shield European automakers from steeper duties on their exports to the U.S.
• Annual inflation showed no signs of picking up pace in three of the eurozone’s largest economies, maintaining a slim possibility of a cut to interest rates at next month’s European Central Bank policy meeting.
• Reserve Bank of New Zealand's board chair Neil Quigley has resigned with immediate effect, New Zealand's Finance Minister Nicola Willis said Friday. (Dow Jones Newswires)
• A looming oil supply glut is weighing on the price outlook despite heightened geopolitical risks, prompting major Wall Street banks to lower their crude forecasts for this year and next.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to vicky.huang@wsj.com.