A governor of the US central bank has made good on her threat to sue the Trump administration, which has attempted to fire her.
Legal representatives for Dr Lisa Cook on Thursday launched an injunction to prevent President Trump removing her from the role, teeing up a legal battle for political independence of the interest rate-setting Federal Reserve.
Such action is unprecedented and will have implications for the body known as the Fed, which is mandated to keep inflation at 2% and ensure maximum employment in the US.
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Mr Trump has said Dr Cook committed mortgage fraud by listing two properties as her primary residence in short succession. Mortgage rates tend to be lower on primary residences.
The move is the latest in a long line of attempts by Mr Trump to exert control of the Fed and bring down interest rates to make borrowing cheaper.
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Dr Cook’s filing described her sacking, announced on social media, as “unprecedented and illegal”, which “if allowed to occur, would the first of its kind in the board’s history”.
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“It would subvert the Federal Reserve Act (FRA), which explicitly requires a showing of “cause” for a governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by governor Cook prior to her Senate confirmation is not.”
Mr Trump has been displeased for months at the slow progress in reducing interest rates, with the Fed’s chair Jerome Powell a frequent target of his ire.
Uncertainty and higher inflation forecasts stemming from the Trump administration’s tariff policies have led to a holding of interest rates at 4.25%-4.5%. Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.
A judge has set the hearing date for Dr Cook’s on Friday.
Who is Dr Cook?
As a governor of the Fed, Dr Cook is one of seven people who set the borrowing rates. She was appointed by President Biden in 2022 and became the first African American person to hold the role. Before her appointment, she served on President Obama’s Council of Economic Advisers and worked at the US Treasury, the government department tasked with overseeing the country’s finances.
Her academic research delved into the impacts of uncertainty on economies, in particular, violence in the Jim Crow South and its impact on patent filing, and the banking system in czarist and post-Soviet Russia.
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Operational independence of the Fed is a core tenet of the US economy, but the market reaction has been muted with US government borrowing costs and stock markets little moved.
