The US Supreme Court on Monday refused to allow President Donald Trump to remove Federal Reserve Governor Lisa Cook from office, delivering a major ruling that protects the independence of the country’s central bank. In a narrow 5-4 decision, the court rejected the Trump administration’s request to lift a lower court order that stopped Cook’s dismissal. The ruling means Cook will remain on the Federal Reserve Board until the courts deliver a final decision on the case, reported Reuters.

The judgment marks the first time a US president has tried to remove a Federal Reserve governor since Congress created the central bank in 1913, according to Reuters report. Trump attempted to dismiss Cook in August last year after accusing her of mortgage fraud. Cook denied the allegations and argued that the accusations served only as a pretext to remove her because of disagreements over monetary policy.

Cook became the first Black woman to serve as a Federal Reserve governor after former President Joe Biden appointed her in 2022. Her current term runs until 2038.

Details of Supreme Court’s decision

The Supreme Court declined to intervene while the legal dispute moves through the lower courts. The justices refused a request from the Justice Department that would have allowed Trump to remove Cook immediately.

The case centres on the Federal Reserve Act, the law that created the US central bank more than a century ago, reported Reuters. The legislation says a president may remove a Federal Reserve governor only “for cause.” However, the law does not clearly define what qualifies as cause or lay out a removal process.

Trump said that mortgage fraud allegations justified Cook’s dismissal. The accusations related to homes she owned in Ann Arbor, Michigan, and Atlanta. They were first raised by Federal Housing Finance Agency Director Bill Pulte, a Trump appointee. However, Cook rejected those claims. 

A federal judge ruled in September that Trump’s attempt to remove Cook likely violated her constitutional right to due process because she did not receive proper notice or a hearing before the dismissal.

The judge also found that the allegations may not qualify as legally valid grounds for removal because they related to events that allegedly occurred before Cook joined the Federal Reserve Board.

An appeals court later refused to suspend that ruling after which the Trump administration asked the Supreme Court for emergency relief. The Supreme Court heard oral arguments earlier this year. Cook attended the hearing along with then-Federal Reserve Chair Jerome Powell.

What does the ruling mean for Federal Reserve?

The decision reinforces the long-standing principle that the Federal Reserve should remain free from political influence when setting interest rates and managing monetary policy. The Federal Reserve plays a central role in controlling inflation, supporting employment and maintaining financial stability. Its decisions affect borrowing costs for households, businesses and governments across the world, reported Reuters.

Trump repeatedly criticised the Federal Reserve for refusing to cut interest rates as aggressively as he wanted. He also publicly attacked Jerome Powell, calling him a “numbskull,” a “major loser” and “very incompetent.”

Before leaving the role of Fed chair, Powell also faced pressure from the Trump administration. Federal prosecutors opened an investigation into cost overruns linked to renovation work at the Federal Reserve’s headquarters in Washington. Powell said that the inquiry aimed to pressure the central bank into lowering interest rates.

A federal judge later blocked subpoenas issued in that investigation after agreeing with Powell that the probe appeared to be an improper attempt to influence monetary policy. Prosecutors eventually dropped the investigation.

Trump’s administration said in court that the president should have broad authority to remove Federal Reserve officials whenever he identifies a reason for doing so. Government lawyers said that decision falls within the president’s “unreviewable discretion.”

Cook’s legal team rejected that argument. They warned that allowing presidents to remove Fed governors for policy disagreements would weaken the central bank’s independence, create uncertainty in financial markets and give future administrations greater control over interest-rate decisions.

Earlier this year, the court struck down most of Trump’s broad global tariffs imposed under emergency powers, rejecting another key part of his economic agenda.