A federal appeals court has determined that U.S. President Donald Trump does not have the authority to remove Federal Reserve governor Lisa Cook from her position. The 2-1 ruling, delivered on Monday, signifies a setback for Trump, enabling Cook to participate in the Federal Reserve’s upcoming policy meeting scheduled for Tuesday and Wednesday, where a decision on cutting U.S. interest rates is anticipated.
In August, Trump announced his decision to fire Cook, alleging that she had engaged in mortgage fraud. Cook has strongly refuted these claims, asserting that the president lacks the power to dismiss her. The legal implications of this ruling extend to the broader context of the Federal Reserve’s independence in setting interest rates, free from political interference. Cook plays a crucial role in the board that determines U.S. interest rates.
Established in 1913, the Federal Reserve was designed with safeguards intended to maintain its autonomy from political influence, a principle underscored by the fact that no president has ever removed a Fed governor. The provisions Trump cited to justify Cook’s dismissal have not been subject to judicial scrutiny, and the administration plans to escalate the matter to the Supreme Court. According to the founding legislation of the Fed, governors may only be removed by the president “for cause,” although this term is not explicitly defined, nor are the removal procedures outlined.
Cook, who was appointed by President Biden and is the first Black woman to serve on the Federal Reserve’s board, filed a lawsuit against Trump in August, alleging that her termination was motivated by her monetary policy decisions.
This year, the Federal Reserve has refrained from cutting interest rates while striving to maintain control over inflation, which has been affected by rising prices linked to Trump’s tariffs on imported goods. Trump has frequently criticized the Fed’s chair, Jerome Powell, demanding more aggressive rate cuts. As the labor market shows signs of slowing, an interest rate cut is widely anticipated during this week’s meeting. On Monday, Trump reiterated his push for a substantial reduction in interest rates, calling on Powell via his Truth Social platform to implement cuts immediately and more significantly than previously planned.
