A U.S. appeals court blocked President Trump’s attempt to fire Federal Reserve Governor Lisa Cook

A federal appeals court has blocked Donald Trump’s attempt to fire Federal Reserve Governor Lisa Cook. This is the first instance the president has pursued such action since the central bank’s founding in 1913. The ruling is a significant legal rebuke to a president who has sought ever greater control over the central bank.

The decision came less than a week before a closely watched policy meeting of the Federal Reserve, at which officials are expected to vote on whether to cut interest rates for the first time this year. While Cook remains sidelined, the court preserves the status quo structure of the seven-member Fed Board of Governors that influences U.S. monetary policy.

The case has attracted interest from across the ideological spectrum, since it deals with both the independence of the Federal Reserve and constraints on presidential authority.

Court upholds protection under law

In a 2-1 decision, the D.C. Circuit Court of Appeals sided with Lisa Cook and barred Mr. Trump from removing her from his board at the Federal Reserve. In a majority opinion, Judge Bradley Garcia and Judge Michelle Childs wrote that the court had issued an order in which they emphasized that Cook had been deprived of fundamentally fair procedures. Under that decision, Cook had never been served with a complaint or allowed to defend herself, and all rights in trust were awarded by law.

At the heart of the case is a provision in the Federal Reserve Act, which states that governors may only be removed “for cause”, such as serious misconduct or an inability to serve. The court noted that the allegations against Cook stemmed from a 2021 mortgage application, filed before she joined the Fed in 2022, and therefore did not meet the legal threshold for dismissal.

One Trump appointee, Judge Gregory Katsas, disagreed with the ruling. According to his view, it is up to the president which kinds of misconduct are of the sackable species. He said that to curtail the president’s authority in this manner risked diluting accountability at the country’s most powerful financial institution.

The US Court of Appeals ruling is Cook’s personal and professional victory. She has strongly denied wrongdoing since the accusations surfaced, decrying them as politically motivated smears against her work. And her legal team hailed the decision, saying that to have removed Ms. Cook from office unlawfully could have rattled investors, destabilized markets, and disrupted confidence in the central bank’s independence.

Court ruling shapes next Fed meeting

The ruling, issued without explanation, arrives at a particularly inopportune time for the Federal Reserve as its policymakers prepare to gather for one of their highly anticipated meetings of the year. The Federal Open Market Committee (FOMC) will likely cut interest rates this week, the first time in more than a decade, as it grapples with evidence of slowing growth and other pressures on the global economy.

A favorable ruling for President Trump would also have dramatically shifted the balance of power within the central bank. Had Cook been removed, Trump would have been free to name a successor and left his choices in control of four of the seven central bank’s board seats. The majority would have given him greater influence over monetary policy, and he has publicly demanded faster and more aggressive rate cuts.

But analysts say the consequences stretch far beyond a single board member. It reflects that the Federal Reserve has not caved to severe political pressure and changed its stripes. Analysts say it sends a message to domestic and international markets that economic, not party political, factors would continue to drive policy. They say stability is necessary to preserve confidence in the U.S. dollar and broader financial system.

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