An appeals court has ruled that Lisa Cook can continue to serve as a Federal Reserve governor, striking down the Trump administration’s attempt to remove her just before a crucial meeting to discuss interest rates. The ruling represents a significant legal and political development, particularly as the Federal Reserve convenes for its next two-day meeting starting Tuesday, where it will consider adjustments to interest rates.
President Donald Trump’s administration is expected to seek a Supreme Court intervention to reverse this decision. Meanwhile, Cook has filed a lawsuit aimed at permanently blocking any effort to dismiss her, a case that will unfold in the courts in the coming weeks. This unprecedented maneuver to oust a sitting Fed governor stands out against the backdrop of the Federal Reserve’s long-standing tradition of independence, which has been maintained since the establishment of the agency 112 years ago. No sitting governor has ever been removed in its history.
In a separate confirmation, Senate Republicans approved Stephen Miran, Trump’s nominee for another position on the Fed’s board. This confirmation comes as the central bank gears up for discussions with all seven governors and 12 regional bank presidents, of which 12 will participate in determining changes to the central bank’s short-term rates.
Federal Reserve Chair Jerome Powell suggested last month that a cut in the key interest rate might be on the table, potentially decreasing the current rate from around 4.3% to 4.1%. This anticipated reduction has already influenced other borrowing costs, such as mortgage and auto loan rates.
Legal challenges regarding Cook’s removal arise from allegations of mortgage fraud linked to her claims of multiple properties as primary residences. These claims, if true, could have allowed her to secure lower mortgage rates. Cook has denied any wrongdoing, and no criminal charges have been filed against her. In a recent court ruling, U.S. District Judge Jia Cobb stated that due process was not followed in the administration’s attempt to remove Cook, noting that only misconduct during a governor’s term can lead to dismissal.
The legal arguments presented by Trump’s legal team state that even if the questioned actions occurred prior to Cook’s official appointment, they raise concerns about her reliability and capability to manage critical decisions affecting the economy.
Trump has openly criticized Powell and other members of the Fed’s rate-setting committee for not reducing rates to his preferred levels quickly enough. He has voiced a desire for the rates to be as low as 1.3%, a figure largely unsupported by Fed officials and most economists.
As the first Black woman to serve as a Fed governor, Cook has an impressive academic background, having studied at Oxford University and Spelman College, and previously teaching at Michigan State University and Harvard’s Kennedy School of Government.
The upcoming meetings and related legal cases will be closely monitored, given their implications for the independence of the Fed and its role in managing economic policy amidst pressure from the current administration.
