An US appeals court has ruled that US President Donald Trump may not remove Federal Reserve governor Lisa Cook from her position.
The 2-1 decision on Monday is a blow to Trump, as it ensures Cook can stay in place for the key Fed policy meeting on Tuesday and Wednesday, where the board are anticipated to lower US borrowing costs.
Trump declared in August that he was firing Cook, claiming she had committed mortgage fraud. Cook denied the allegations and asserted that the president lacked power to remove her.
This legal battle has significant implications for the Fed's capacity to set interest rates without interference from politicians.
Cook is part of the governing body tasked with setting interest rates in the United States.
When Congress established the Fed in 1913, it incorporated provisions to maintain its autonomy from politics. No US leader has previously dismissed a Fed board member.
The statutes invoked by Trump to justify his attempt to fire Cook had never been tested in court. The Trump administration is likely to challenge Monday's decision to the highest court.
Under the legislation that established the Fed, its governors may only be dismissed by a president with justification, though the law does not define the term nor outline procedures for removal.
Cook, a Biden appointee and the pioneering black woman to serve as a Fed board member, sued Trump in August, arguing she was being fired due to her economic views.
The Fed has maintained interest rates so far this year as it aims to manage inflation, which have been driven in part by the impact of Trump's trade taxes on imported goods.
Trump has repeatedly demanded aggressive rate cuts and has criticized Fed Chair Jerome Powell over his handling of interest rates.
A rate cut is expected this week, however, in an effort to stimulate a slow US job market.
On Monday, Trump repeated his demand for a large interest rate cut, posting on his Truth Social platform that Fed Chair Jerome Powell "must cut interest rates, now, and larger than he had in mind."
