Fed official sues Trump over attempt to fire her, challenging his power over the independent agency

WASHINGTON (AP) — Federal Reserve Governor Lisa Cook has sued the Trump administration in an effort to overturn the president’s attempt to fire her, launching an unprecedented legal battle that could significantly reshape the Fed’s longstanding political independence.

The lawsuit seeks an emergency injunction to block her firing and “confirm her status” as a member of the Fed’s governing board.

“The President’s effort to terminate a Senate-confirmed Federal Reserve Board member is a broadside attack on the century-old independence of the Federal Reserve System,” Cook’s lawyer, Abbe David Lowell, wrote in a court filing.

The case could become a turning point for the 112-year old Federal Reserve, which was designed by Congress to be insulated from day-to-day political influence. Economists prefer independent central banks because they can more easily take unpopular measures, such as lifting interest rates to combat inflation, than elected officials can.

The case was assigned to Judge Jia Cobb, an appointee of former President Joe Biden. A hearing was scheduled for Friday.

Many economists worry that if the Fed falls under the control of the White House, it will keep its key interest rate lower than justified by economic fundamentals to satisfy Trump’s demands for cheaper borrowing. That could accelerate inflation and could also push up longer-term interest rates, such as those on mortgages and car loans. Investors may demand a higher yield to own bonds to offset greater inflation in the future, lifting borrowing costs throughout the economy.

“If Cook wins, she stays in place and we achieve some semblance of stability,” said Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania and Fed historian in a Substack post. “If she loses … that’s the end of Fed independence as it has been constructed and reconstructed over 112 years.”

No president has sought to fire a Fed governor before until Trump posted a letter on media late Monday saying that Cook was fired. Trump said the reason for her removal were allegations that she committed mortgage fraud in 2021, before she was appointed to the board.