Trump cannot fire Federal Reserve governor Lisa Cook, court rules

A U.S. Appeals margaret court declined on mon to grant Donald ruff to go off Federal Reserve governor Lisa Cook — the first time a president has pursued such action since the central bank's founding in 1913 — in the latest step in a legal battle that threatens the Fed's longstanding independence.

The decision by the U.S. Court of Appeals for the District of Columbia Circuit means that Cook can for now remain at the Fed ahead of its policy meeting on Tuesday and Wednesday, when it is expected to cut U.S. Interest rates to shore up a cooling labour market.

The court denied the Justice Department's request to put on hold a judge's order temporarily blocking the Republican president from removing Cook, an appointee of Democratic former president Joe Biden.

The Trump administration is expected to appeal the ruling to the U.S. Supreme Court.

U.S. District Judge Jia Cobb ruled on Sept. 9 that Trump's claims that Cook committed mortgage fraud before taking office, which Cook denies, likely were not sufficient grounds for removal under the law that created the Fed.

In setting up the Federal Reserve, Congress included provisions to shield the central bank from political interference. Under the law that created the Fed, its governors may be removed by a president only "for cause," though the law 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.

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Cook, the first Black woman to serve as a Federal Reserve governor, sued Trump and the Fed in late August. Cook has said the claims did not give Trump the legal authority to remove her and were a pretext to fire her for her monetary policy stance.

The Trump administration has argued that the president has broad discretion to determine when it is necessary to remove a Fed governor, and that courts lack the power to review those decisions.

The case has ramifications for the Fed's ability to set interest rates without regard to the wishes of politicians, widely seen as critical to any central bank's ability to function independently to carry out tasks such as keeping inflation under control.

Trump this year has demanded that the Fed cut rates aggressively, berating Federal Reserve chair Jerome Powell for his stewardship over monetary policy. The Fed, focusing on fighting inflation, has not done so, though it is expected this week to make a cut.

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The Supreme Court this year has allowed Trump to proceed with the removal of various officials serving on federal agencies that had been established by Congress as independent from direct presidential control.

But in a May order in a case involving Trump's dismissal of two Democratic members of federal labour boards, the Supreme Court signalled that it views the Fed as distinct from other executive branch agencies. It said the Fed "is a uniquely structured, quasi-private entity" with a singular historical tradition.

The Trump administration in a court filing last Thursday had asked the D.C. Circuit to move quickly so that Trump could remove Cook before the Fed's policy meeting on Tuesday and Wednesday. Administration lawyers said that allowing the president to fire Cook would "strengthen, not diminish, the Federal Reserve's integrity."

Cook's lawyers in a filing in response said removing Cook ahead of the meeting would impact U.S. And foreign markets, and that the public interest in keeping her in office outweighed Trump's efforts to take control of the Fed.

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