Trump temporarily blocked from firing Fed governor Lisa Cook

A federal judge has temporarily blocked President Donald Trump from sacking Federal Reserve governor Lisa Cook, who is part of the board responsible for setting US interest rates.

The ruling is a win for the central bank in an unprecedented legal battle with the White House over the independence of the Fed.

Last month, Trump said he had sacked Ms Cook but the Fed said she remains as a governor.

Judge Jia Cobb said “President Trump has not identified anything related to Cook’s conduct or job performance as a board member that would indicate that she is harming the board or the public interest by executing her duties unfaithfully or ineffectively.”

The Fed declined to comment on the ruling but has previously said it would abide by the court’s decision.

The White House said: “This ruling will not be the last say on the matter, and the Trump administration will continue to work to restore accountability and confidence in the Fed.”

Trump has repeatedly criticised the Fed, in particular its chair Jerome Powell, for not cutting interest rates while central banks in Europe and the UK have trimmed borrowing costs.

The Fed has held off cuts while it assesses the impact of Trump’s tariffs on inflation.

Ms Cook’s lawyer Abbe David Lowell said: “This ruling recognises and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference.

“Governor Cook will continue to carry out her sworn duties as a Senate-confirmed board governor.”

Ms Cook sued Trump over his attempt to fire her, setting up a potential legal battle with implications for the US central bank’s autonomy.

Trump and Federal Housing and Finance Authority director William Pulte have claimed that Ms Cook inaccurately described three different properties on mortgage applications, which may have enabled her to obtain lower interest rates and tax credits.

The law that created the Fed says governors can only be removed “for cause,” but does not define what that means or how that could be done in practice.

It is the first time that a president has tried to fire a Fed governor, and the law has yet to be tested in court.

Judge Cobb wrote: “The best reading of the ‘for cause’ provision is that the bases for removal of a member of the board of governors are limited to grounds concerning a governor’s behaviour in office and whether they have been faithfully and effectively executing their statutory duties.

“‘For cause’ thus does not contemplate removing an individual purely for conduct that occurred before they began in office.”

In response to the ruling, a spokesperson for the White House claimed: “President Trump lawfully removed Lisa Cook for cause due to credible allegations of mortgage fraud from her highly sensitive position overseeing financial institutions on the Federal Reserve board of governors.”

The case – which is likely to end up in the US Supreme Court – is seen as crucial to the central bank’s ability to set interest rates without political influence.

The Fed is due to meet next week and is expected to announce its first interest rate cut since September 2024.