WASHINGTON (Reuters) -A court hearing on President Donald Trump’s attempt to fire Federal Reserve Governor Lisa Cook ended on Friday with no immediate ruling from the judge hearing the unprecedented legal fight, meaning the U.S. central bank policymaker will remain in place for now.
After hearing oral arguments for two hours in a court in Washington, D.C., U.S. District Judge Jia Cobb asked Cook’s lawyers to file a brief on Tuesday laying out in more detail their arguments for why the ouster was unlawful.
The case, which will likely end up before the U.S. Supreme Court, has ramifications for the Fed’s ability to set interest rate policy without regard to politicians’ wishes, widely seen as critical to any central bank’s ability to keep inflation under control.
The Fed has said it would abide by any court decision. It has given no indication that Cook’s status as a member of its Board of Governors has changed, and she remains listed on its website as an active member of several internal committees.
Concerns about the Fed’s independence from the White House in setting monetary policy could have a ripple effect throughout the global economy. The U.S. dollar stumbled against other major currencies after Trump said he would remove Cook.
Cook sued Trump and the Fed on Thursday, saying the Republican president’s claim she engaged in mortgage fraud before she joined the central bank did not give him legal authority to remove her, and was a pretext to fire her for her monetary policy stance.
“Cause for the president means she won’t go along with the interest rate drop,” Cook’s lawyer, prominent Washington attorney Abbe Lowell, said during the hearing.
Cook has denied committing mortgage fraud, calling the allegations “unsubstantiated and unproven” but has not explained the basis for that position.
Trump attacked the Fed for not cutting rates during his first term in the White House and resumed that campaign when he returned to power in early 2025. He has berated Fed Chair Jerome Powell for the central bank’s rate policy and for allegedly mishandling a multibillion-dollar renovation project, though he has stopped threatening to remove Powell before his term as central bank chief ends in May.
The Fed cut rates three times in 2024, but has held them steady since December out of concern that Trump’s aggressive reshaping of U.S. trade policy could boost inflation. Cook voted with Powell and the majority of the central bank’s rate-setting committee in all those policy decisions.
The central bank, however, is widely expected to reduce its benchmark interest rate by a quarter of a percentage point from the current 4.25%-4.50% range at its September 16-17 policy meeting. Trump has demanded a far more aggressive decrease in borrowing costs.
GROUNDS FOR REMOVAL
The law that created the Fed says governors may be removed only “for cause,” but does not define the term nor establish procedures for removal. No president has ever removed a Fed governor, and the law has never been tested in court.
Trump says Cook described separate properties in Michigan and Georgia as primary residences on mortgage applications in 2021, which could have allowed her to obtain lower interest rates.
Cook has said that even if the allegations were true, it would not be grounds for removal because the alleged conduct occurred before she was confirmed by the U.S. Senate and took office in 2022.
Trump administration lawyers argued in a court filing on Friday that alleged mortgage fraud is sufficient cause to remove a Fed governor, regardless of when it happened.
The president and William Pulte, the Trump-appointed director of the Federal Housing Finance Agency who first raised questions about Cook’s mortgages earlier in August, have said the alleged conduct calls her integrity into question.
The administration also argued that giving Fed governors protections from removal violates the president’s broad constitutional powers to control the executive branch, as it has in lawsuits filed by other ex-officials who have been fired by Trump.
Cook has countered that federal laws limiting the president’s ability to remove officials from other agencies define cause as negligence, malfeasance or inefficiency that occurs when an official is in office, and the same standard should apply to the Fed.
The Supreme Court’s conservative majority has tentatively allowed Trump to fire officials from other agencies. In an order issued in May, the court distinguished the Fed from those agencies, citing its unique structure and “distinct historical tradition.”
Cook’s departure would allow Trump to name his fourth pick to the Fed’s seven-member board.
(Reporting by Daniel Wiessner in Albany, New York, Jan Wolfe in Washington and Ann Saphir in San Francisco; Editing by Alexia Garamfalvi, Cynthia Osterman, Noeleen Walder and Paul Simao)
Comments