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A U.S. appeals court ruled on Monday that President Donald Trump cannot remove Federal Reserve Governor Lisa Cook from her post, allowing her to take part in the central bank’s two-day policy meeting that begins on Tuesday.
The Court of Appeals for the District of Columbia Circuit emphasized that Federal Reserve Board members can only be dismissed for "cause," meaning a legitimate and legally sufficient reason.
The judges underlined that Cook is entitled to prior notice and the right to defend herself before removal proceedings can move forward.
Trump had announced on Aug. 25 that he dismissed Cook, who is the first Black woman to serve as a governor on the Fed’s Board, accusing her of misrepresenting information in mortgage contracts.
He posted a letter addressed to Cook on his social media platform, stating that under the Federal Reserve Act, he had the authority to remove board members "for cause" and that sufficient grounds existed in this case.
The move sparked concerns that Trump could undermine the Federal Reserve’s independence, a principle considered vital for maintaining credibility in U.S. monetary policy.
Cook responded by filing a lawsuit to block her dismissal, arguing that the allegations did not constitute valid grounds for removal.
Last week, U.S. District Judge Jia Cobb temporarily prevented her removal, ruling that the mortgage fraud claims did not justify her dismissal. The Trump administration appealed that decision, but the appellate court refused to suspend the lower court ruling.
Reports in the U.S. press indicate that the case may ultimately be brought before the Supreme Court.
The Federal Reserve Board is set to hold its monetary policy meeting on Oct. 16-17, with the markets fully pricing at least a 25 basis point cut as recession fears are reigniting, with weaker job growth pressuring the central bank to give relief to the economy by reducing lending costs.
The Fed has been holding the benchmark rate in a range of 4.25%-4.50% since December.
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