Judge blocks Trump from firing Fed Governor Lisa Cook

A federal judge has temporarily stopped President Donald Trump from removing Federal Reserve Governor Lisa Cook, who serves on the board that sets US interest rates. The decision represents an early legal challenge for the White House in a rare dispute over the central bank's independence.

Trump announced in August that he had dismissed Cook, but the Federal Reserve has insisted she remains a governor.

The temporary ruling, however, does not resolve whether Trump’s claim that Cook committed mortgage fraud before assuming office—an allegation she denies—constitutes valid grounds for removal.

The Federal Reserve declined to comment on the ruling but has indicated it will respect the court’s decision. The White House has not responded to requests for comment.

"This ruling recognises and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference," Cook’s lawyer, Abbe David Lowell, said in a statement. "Governor Cook will continue to carry out her sworn duties as a Senate-confirmed Board Governor," he added.

Trump and Federal Housing and Finance Authority director William Pulte have argued that Cook provided inaccurate information on three mortgage applications, which may have allowed her to receive lower interest rates and tax credits.

Last month, Cook filed a lawsuit against Trump, seeking a court declaration that his firing order is "unlawful and void."

The law establishing the Federal Reserve allows governors to be removed only "for cause," but does not clarify what constitutes cause or how removal should proceed. A president attempting to fire a Fed governor is unprecedented, and the matter has not yet been tested in court.

District Judge Jia Cobb, in her preliminary ruling, noted, "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."

The case is expected to reach the US Supreme Court and is seen as critical to protecting the central bank’s independence in setting interest rates without political pressure.

The ruling comes just ahead of a Federal Reserve meeting next week, when the bank is expected to announce its first interest rate reduction since September 2024.

Trump has frequently criticised the Fed, including Chair Jerome Powell, urging the bank to lower borrowing costs to stimulate the US economy.