A federal judge in Washington D.C., temporarily blocked President Trump from firing Federal Reserve Governor Lisa Cook late Tuesday night.
The ruling stymies Trump's aggressive effort to exercise more control over the central bank, at least for now.
Federal District Judge Jia Cobb granted Cook a preliminary injunction, finding that the president's effort to remove Cook likely violated the Federal Reserve Act. Under that law, designed to insulate the central bank from political interference, Fed governors can only be removed "for cause." Judge Cobb found that in order to warrant firing, the cause would likely be limited to bad conduct while in office.
Trump had sought to fire Cook on the basis of unproven allegations that she had made false statements on a mortgage application in 2021, before joining the Fed's board.
Judge Cobb also ruled that Trump had likely violated Cook's right to due process and that firing Cook would result in "irreparable harm" to the Fed governor.
"This ruling recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference," Cook's attorney Abbe Lowell wrote in a statement. "Allowing the President to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law."
Trump sought to fire Cook in a social media post last month. It was his latest attack on the Fed as he tries to pressure the central bank to lower interest rates more quickly.
Cook, however, has continued serving at the Fed as the court case proceeds.
Concerns about Fed independence
Trump's attacks against the Fed — and his attempted firing of Cook — have raised concerns about the central bank's independence.
The Fed has long operated with autonomy to set interest rates, free from political pressure, given how vital its decisions are in helping shape the U.S. and global economies.
But Trump is now looking to reshape the Fed's seven-member governing board. Trump already has an opportunity to appoint one new member to the Fed's governing board after the surprise resignation of Adriana Kugler in August.
Trump has nominated Stephen Miran, a White House economic adviser, to temporarily fill Kugler's role. Miran appeared for his Senate confirmation hearing last week and is now waiting for a vote. By removing Cook, Trump hoped to create a second vacancy that he could fill.
If he ultimately succeeds in that effort, a majority of the board would be Trump appointees. Two Fed governors, appointed by Trump during his first term in the White House, dissented from their colleagues and voted for a rate cut during the last Fed meeting in July.
The central bank's next rate setting meeting is this coming week. The Fed is widely expected to lower its benchmark interest rate by a quarter percentage point in response to a weakening job market.
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