Court blocks Trump’s attempt to fire Fed governor ahead of critical vote

A federal appeals court on Monday ruled that President Donald Trump cannot fire Federal Reserve Governor Lisa Cook ahead of the Fed’s September meeting that commenced on Tuesday and will include a critical interest rate-setting vote.

In a 2-1 decision, a panel of judges on the U.S. Court of Appeals for the District of Columbia sided with a lower court ruling which put the president’s termination order on hold while Cook pursues a legal challenge. Trump’s legal team filed an emergency request with the appeals court late last week hoping for a stay that would have led to Cook’s removal while she fights Trump’s attempt to fire her.

Trump spokesman Kush Desai on Tuesday said the administration will appeal the ruling to the Supreme Court.

“The president lawfully removed Lisa Cook for cause. The administration will appeal this decision and looks forward to ultimate victory on the issue,” Desai said in a statement.

Trump tried to fire Cook in August following allegations leveled by the president’s housing finance director, Bill Pulte, that Cook had committed “mortgage fraud” in 2021. Days later, Cook filed a lawsuit arguing Trump’s move was an “illegal and unprecedented” attempt to remove her based on “unsubstantiated allegations”.

“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would be the first of its kind in the board’s history,” Abbe Lowell, Cook’s attorney, wrote in the lawsuit.

Pulte alleged that in 2021 Cook applied for two mortgage loans, one in Atlanta and one in Michigan, and indicated in each application that the properties would be her “primary residence.”

Cook, an economist and former professor at Michigan State University, was appointed to her governor’s position in 2022 by President Joe Biden. She is the first African American woman to be appointed to the Fed board. Cook had previously served on the board of directors of the Federal Reserve Bank of Chicago.

Cook has not been charged with a crime. Her lawsuit sets the stage for a legal battle that could ultimately be decided by the Supreme Court. If Trump is successful in removing Cook, it opens the door for another appointee to the U.S. central bank that would be more supportive of Trump’s view of monetary policy, which has included demands to lower the body’s benchmark federal funds interest rate.

Cook’s lawyer argues that Trump’s attempt to fire the Fed governor subverts the Federal Reserve Act, which explicitly requires the showing of “cause” for a governor’s removal.

Many experts questioned the legality of Trump’s actions, pointing out that the allegations against Cook were unproven and involved conduct that predated her time at the Fed. Nor was Cook afforded an opportunity to review the evidence and respond to the claims formally, which struck many observers as legally problematic.

Monday’s appeals court ruling comes just ahead of the Fed’s September policy meeting, at which the monetary body is widely expected to make a downward adjustment to its benchmark federal funds rate.

What is Trump’s beef with the Fed?

During his second term, Trump has leveled consistent criticism at the Fed and more specifically at Jerome Powell, including threats to fire or remove the chairman, for not moving fast enough to lower interest rates, which the president has argued are three points higher than they should be. The Fed’s intra-bank overnight rate has held steady at 4.25% to 4.5% since December 2024.

Trump provided the gateway to Powell’s leadership position at the Fed, thanks to a 2017 presidential appointment that flew through the Senate Banking Committee and was confirmed by the full Senate in early 2018.

Powell, a Republican and former private equity executive, joined the Federal Reserve in 2012 and ascended to the chairmanship in 2018 via Trump’s appointment. Biden renewed Powell’s term in 2022, which runs through May 2026.