The Trump administration is making a significant legal move by requesting an appeals court to remove Lisa Cook from the Federal Reserve’s board of governors by this coming Monday. This action comes as the central bank approaches a critical meeting where it will decide on interest rates next Tuesday and Wednesday. The administration’s urgency signals an effort to influence the board’s makeup ahead of this pivotal financial decision.
In August, President Trump sought to dismiss Cook, claiming her prior conduct raised questions about her integrity. Specifically, he accused her of mortgage fraud for allegedly designating two properties as “primary residences” in July 2021, prior to her joining the Fed. Such claims could afford lower mortgage rates that typically come with primary residences compared to rental properties or second homes. Cook has firmly denied these accusations.
A U.S. District Court judge ruled earlier that the Trump administration had failed to meet the legal standard required to remove Federal Reserve governors, which specifies that they can only be dismissed “for cause”—a condition related to misconduct occurring while in office. As Cook did not take her position until 2022, this ruling favored her standing on the board.
In their emergency appeal to the higher court, Trump’s legal team argued that Cook’s alleged pre-board actions undermine trustworthiness, questioning her capacity to responsibly manage interest rates and the economy. The administration is seeking a fast decision to potentially oust Cook before she can participate in the upcoming Fed meeting.
Should the appeals court side with the administration, Cook would be removed temporarily from her position until the matter is settled in court, missing the crucial upcoming meeting. Conversely, if the court rules in her favor, the administration might escalate the situation by seeking an emergency ruling from the Supreme Court.
Despite the controversy surrounding Cook’s position, the Federal Reserve is widely expected to lower its benchmark interest rate by a quarter-point to approximately 4.1% in the upcoming meeting. A reduction in the key rate typically leads to decreased borrowing costs across various sectors, including mortgages and business loans, with some rates already declining as markets anticipate these cuts.
As the administration pushes for Stephen Miran, a top economic adviser to Trump, to fill an open position on the Federal Reserve board, his approval could be secured as soon as Monday. If successful, Miran’s presence could tilt discussions towards a more aggressive half-point reduction of the Fed’s rate, influencing the central bank’s monetary policy direction.
Nonetheless, the final decision on interest rates involves 12 voting officials, comprising the seven members of the Fed’s board and five of its regional bank presidents who participate on a rotating basis. While Trump’s appointees, Christopher Waller and Michelle Bowman, may favor a more substantial rate cut, several regional bank presidents express concerns regarding ongoing inflation, likely opposing drastic reductions.
Should a quarter-point cut be approved, it is anticipated that there may be dissenting opinions within the board—both from those advocating for maintaining the current rate and those pushing for a more considerable reduction. The outcomes of these proceedings will have significant implications for the economy as the Fed navigates a complex financial landscape.
