WASHINGTON (AP) — A court of appeals decided on Monday thatLisa CookShe can continue as a Federal Reserve governor, rejecting President Donald Trump’s attempts to dismiss her shortly before a significant interest rate vote.
The Trump administration is anticipated to swiftly approach the Supreme Court in a final attempt to remove Cook. The Fed’s upcoming two-day meeting, aimed at deciding its next interest rate action, starts on Tuesday morning. Additionally, Cook’s legal challenge to permanently prevent her termination still needs to progress through the judicial system.
The White House effort to replace Cook represents an extraordinary attempt to change the Fed’s seven-member leadership, which was intended to remain largely separate from political influence. No president has ever removed a current Fed governor during the agency’s 112-year history.
In addition, Senate Republicans on Mondayconfirmed Stephen Miran, Trump’s nominee for a vacant position on the Federal Reserve’s board. Unless there is any final action from the Supreme Court, the Fed’s interest rate decision-making committee will convene on Tuesday and Wednesday, consisting of all seven governors along with the 12 regional bank presidents.
Out of the 19 officials, twelve will cast their votes regarding the adjustment of the central bank’s short-term interest rate: consisting of all seven governors and five regional presidents, who take turns in voting.
Chair Jerome Powell indicated in a prominent speech last month that the Federal Reserve is expected to lower its main interest rate during this meeting, from approximately 4.3% to 4.1%. Other forms of borrowing, like mortgage rates and auto loans, have already dropped in anticipation of the reduction and may decrease further.
Trump sought to fire Cook Aug. 25but a federal judgeruled last weekthat the removal was unlawful and restored her to the Fed’s board. Trump nominee Bill Pulte has alleged that Cook committed mortgage fraud since she listed two properties as “primary residences” in July 2021, prior to joining the board. These types of claims can result in a reduced mortgage rate and a smaller down payment compared to if one of the properties had been classified as a rental or second home. Cook has refuted the allegations.
The appellate court ruled 2-1 that Cook’s constitutional rights were breached as the administration failed to provide her with a structured chance to address the allegations.
The effort to dismiss Cook is viewed by numerous legal experts as a danger to undermine the Fed’s long-standing political autonomy. Economists favorindependent central bankssince they can undertake unpopularity-inducing actions such as raising interest rates to manage inflation with greater ease than elected officials.
Several economists are concerned that if the Federal Reserve comes under the influence of the White House, it may maintain its primary interest rate at a level lower than what economic conditions warrant, in order to meet Trump’s push for more affordable borrowing. This couldaccelerate inflationand might also increase long-term interest rates, including those for mortgages and auto loans. Investors could ask for a higher return on bonds to compensate for anticipated inflation, which would raise the cost of borrowing for the U.S. government and the overall economy.
In addition, Miran leads the White House’s Council of Economic Advisers and mentioned earlier this month that he will take a leave of absence without pay but will continue his position while being on the Fed’s board. This will be the first time in many years that someone from the executive branch holds a role at the Fed.
Miran has been selected to complete a term that ends in January, but he may continue in the position if no successor is appointed.
Cook has refuted any allegations and has not faced criminal charges. As per the documentsacquired from The Associated Press, Cook stated that her Atlanta condo would be a “vacation home,” as noted in a loan estimate she received in May 2021. In another form requesting a security clearance, she referred to it as a “second home.” Both documents seem to challenge the administration’s allegations of fraud.
Last week, United States District CourtJudge Jia Cobb ruledthat the administration had failed to meet a legal requirement stating that Federal Reserve governors can only be removed “for cause,” which she indicated was restricted to improper behavior during their tenure. Cook became a member of the Fed’s board in 2022.
In their urgent request, Trump’s legal team claimed that regardless of when the actions took place before her tenure as governor, her supposed behavior “undoubtedly raises doubts about Cook’s reliability and whether she can effectively manage interest rates and the economy.”
Trump has repeatedly attackedPowell and the other members of the Federal Reserve’s interest-rate decision-making committee have faced criticism for not reducing the short-term interest rate under their control at a faster pace. Trump has expressed his belief that it should be as low as 1.3%, a figure that is not supported by any Fed official or most economists.
Cook is the first Black womanto act as a Federal Reserve Governor. She was a Marshall Scholar who earned her degrees from Oxford University and Spelman College, and before joining the board, she taught at Michigan State University and Harvard University’s Kennedy School of Government.
