Donald Trump’s bid to fire a US central bank rate-setter has suffered a setback after a federal judge blocked the move.
The president revealed last month that he was removing Lisa Cook from her post at the Federal Reserve on alleged mortgage fraud grounds.
The move was widely seen by commentators as a bid to destroy the Fed’s independence through the appointment of a new governor who would support his bid for interest rate cuts to boost the trade war-hit US economy.
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Ms Cook, who denies wrongdoing and any cause to dismiss her, was appointed to the Fed’s board by Joe Biden. The board forms part of the panel that votes on US interest rate decisions.
She secured a preliminary court ruling late on Tuesday which found that the Trump administration’s claims she committed mortgage fraud prior to taking office were likely not sufficient grounds for her removal.
The White House has claimed she inaccurately described three separate properties on mortgage applications, which could have allowed her to obtain lower interest rates and tax credits.
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But US District Judge Jia Cobb said: “President Trump has not identified anything related to Cook’s conduct or job performance as a Board member that would indicate that she is harming the Board or the public interest by executing her duties unfaithfully or ineffectively.”
The ruling, which could yet be appealed, means she can continue in her role while her own lawsuit proceeds.
It could end up in the Supreme Court.
Mr Trump’s demands this year that the Fed cuts rates have so far fallen on deaf ears as the central bank voting has shown too much concern over trade war-linked inflation. Prices have risen as higher import duties have been passed on.
He has repeatedly called for Fed chair Jay Powell to resign but retracted threats to fire him.
The president may actually get his wish for a cut this month amid a deterioration in the employment market – also widely blamed on his trade war – as hiring has slumped.
The central bank, unlike the Bank of England, has a dual mandate to ensure maximum employment as well as keeping inflation in check.
Any rate cut would be unlikely to extinguish the Trump administration’s effort to influence monetary policy.
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The Fed’s ability to set interest rates without regard to politicians’ demands is critical to market confidence, let alone the central bank’s ability to keep inflation under control.
Neither the Fed or the White House commented on the ruling.
Ms Cook’s lawyer, Abbe Lowell, said: “This ruling recognises and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference.”
