Federal court blocks Trump from sacking Lisa Cook

A federal appeals court has stopped US President Donald Trump from removing Federal Reserve Governor Lisa Cook, ruling that he lacks the authority to do so.

In a 2-1 decision delivered on Monday, the judges said Cook will retain her seat in time for the Fed’s policy meeting scheduled for Tuesday and Wednesday, where an interest rate cut is widely anticipated.

Trump had announced her dismissal in August, accusing her of mortgage fraud. Cook rejected the claim, insisting that the president had no legal basis for her removal.

The case has drawn intense attention, given its implications for the Federal Reserve’s independence in setting monetary policy. Cook sits on the Fed’s Board of Governors, which determines interest rates in the United States.

Congress designed the Fed in 1913 to function outside political influence, and no US president has ever dismissed a sitting governor. The statutes Trump relied on to justify his move had never before been tested in the courts. Legal experts expect his administration to escalate the matter to the Supreme Court.

By law, Fed governors can only be removed “for cause,” though the phrase is undefined and lacks any established removal process.

Cook, appointed by President Joe Biden and the first Black woman to hold the post, sued in August, alleging her attempted dismissal was retaliation for her policy views.

So far this year, the Fed has resisted cutting rates as it works to curb inflation, partly fuelled by the impact of Trump’s tariffs on imported goods.

Trump, however, has repeatedly pressed for aggressive reductions, often criticising Fed Chair Jerome Powell. A rate cut is now expected this week to help stimulate a weakening labour market.

On Monday, Trump renewed his push, writing on his Truth Social platform that Powell “must cut interest rates, now, and bigger than he had in mind.”