NextFin news, A U.S. Court of Appeals for the District of Columbia Circuit ruled on Monday that former President Donald Trump cannot remove Federal Reserve Governor Lisa Cook from her position, marking the first time since the Federal Reserve's founding in 1913 that a president's attempt to fire a Fed governor has been legally challenged.
The court's decision came in Washington, D.C., and means Cook, an appointee of former President Joe Biden, will remain on the Federal Reserve Board during the central bank's policy meeting scheduled for Tuesday and Wednesday, where it is expected to cut interest rates to support a cooling labor market.
The ruling denied the Justice Department's request to stay a lower court judge's order that temporarily blocked Trump's effort to remove Cook. U.S. District Judge Jia Cobb had ruled on September 9 that Trump's allegations of mortgage fraud against Cook, which she denies, likely do not constitute sufficient grounds for removal under the Federal Reserve Act.
Under the Federal Reserve Act, governors may only be removed "for cause," a term not clearly defined by law, and no president has ever removed a Fed governor before. The law was designed to protect the Fed's independence from political interference.
Lisa Cook, the first Black woman to serve as a Federal Reserve governor, filed a lawsuit against Trump and the Fed in late August, arguing that the claims against her were a pretext to remove her due to her monetary policy views. The Trump administration contended that the president has broad discretion to remove Fed governors and that courts should not review such decisions.
The case has significant implications for the Federal Reserve's autonomy in setting monetary policy, particularly regarding interest rates and inflation control. Trump had publicly pressured the Fed to cut rates aggressively, criticizing Federal Reserve Chair Jerome Powell, who has prioritized fighting inflation.
The Trump administration has indicated plans to appeal the appeals court ruling to the U.S. Supreme Court. The Supreme Court has previously allowed Trump to remove officials from other independent federal agencies but has recognized the Fed's unique status as a quasi-private entity with a distinct historical tradition.
The appeals court decision was announced on Monday in Washington, D.C., just ahead of the Federal Reserve's scheduled policy meeting on Tuesday and Wednesday.
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