In a dramatic showdown between the White House and the US central bank, a federal appeals court has blocked President Donald Trump’s last-minute bid to fire Federal Reserve Chair Lisa Cook just days before the Fed’s highly anticipated interest rate meeting. The ruling represents a significant victory for the independence of the Federal Reserve and sets up the possibility of a constitutional clash if Trump seeks intervention from the Supreme Court.
The Attempt to Oust Chair Cook
According to legal filings, the Trump administration argued that Cook, appointed in 2022, had “lost the confidence of the president” and that her decisions on interest rates had “caused undue harm to American households and businesses.” The White House had issued an executive order late last week attempting to remove her from office, naming an interim replacement who would have presided over the upcoming rate decision.
Critics immediately raised alarm bells, noting that Federal Reserve governors and the chair are statutorily protected from removal except for “cause,” such as misconduct or incapacity. Removing a Fed chair for policy disagreements, they said, would set a dangerous precedent and politicize the institution tasked with managing monetary stability.
The Court’s Ruling
The US Court of Appeals issued an emergency injunction late Sunday, halting Trump’s move. The panel of judges wrote that the president had not demonstrated legal grounds to justify Cook’s dismissal and emphasized that the Federal Reserve’s independence is a cornerstone of US economic governance.
“The president may disagree with monetary policy,” the judges wrote, “but that does not confer unilateral power to remove the chair of the Federal Reserve absent clear statutory cause.”
The court’s decision means Cook will remain in her post for the Fed’s upcoming meeting, where policymakers are widely expected to weigh further interest rate cuts in response to slowing growth and lingering inflationary pressures.
Market Reaction
Markets reacted with a mix of relief and caution. Treasury yields fell modestly on the news, reflecting expectations that the Fed will retain its focus on economic fundamentals rather than political pressures. US equities, which had been jittery in recent days amid fears of central bank instability, rebounded in early trading.
Economists stressed that the mere attempt to remove Cook had already injected uncertainty into markets, reinforcing the perception of political risk in US economic policy. “Even the hint of undermining the Fed shakes investor confidence,” said one Wall Street strategist. “This episode underscores the fragility of institutional independence in the current political climate.”
Trump’s Options
The ruling does not end the fight. Trump’s legal team indicated it will appeal to the Supreme Court, arguing that the Constitution grants the president broad authority to remove executive officials. While past precedents, including rulings on independent agencies like the CFPB and SEC, provide some ambiguity, most legal scholars believe the Fed chair’s protections are stronger.
“The courts have historically recognized the Fed as unique,” said a former Justice Department lawyer. “If Trump pursues this to the Supreme Court, it could trigger one of the most consequential rulings on presidential power in decades.”
Implications for the Federal Reserve
The episode highlights the increasing politicization of the Federal Reserve. Traditionally viewed as insulated from political pressure, the Fed has faced growing attacks in recent years from both the left and right over its handling of inflation, interest rates, and financial stability.
Cook, the first Black woman to lead the central bank, has been praised for her data-driven approach and focus on balancing inflation control with employment growth. But Trump and his allies have accused her of keeping interest rates “too high for too long,” contributing to what they describe as a weakening economy.
What Comes Next
The Fed is set to announce its next policy decision later this week. While Cook’s leadership remains intact for now, the battle over her position raises broader questions about the resilience of US institutions under political pressure.
If Trump pursues Supreme Court intervention, the case could set a precedent not only for the Federal Reserve but for the independence of all US regulatory agencies. In the meantime, global markets, policymakers, and investors will be watching closely as America’s central bank navigates one of the most politically fraught periods in its history.
