Donald Trump’s attempt to remove a US central bank rate-setter has hit a roadblock following a federal judge’s intervention.
The president announced last month his decision to dismiss Lisa Cook from her position at the Federal Reserve over alleged mortgage fraud allegations.
This move was widely interpreted as an effort to compromise the Fed’s independence by appointing a new governor who would align with his agenda of interest rate cuts to stimulate the trade war-affected US economy.
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Despite the accusations, Ms. Cook, appointed to the Fed’s board by former president Joe Biden, denies any misconduct that would warrant her removal. The board plays a crucial role in deciding US interest rates.
In a recent development, a federal judge ruled in favor of Ms. Cook, stating that the claims of mortgage fraud made against her by the Trump administration were insufficient grounds for her removal.
The White House alleged that Ms. Cook provided inaccurate information on mortgage applications for three properties, potentially leading to lower interest rates and tax benefits.
However, Judge Jia Cobb stated, «President Trump has not provided evidence of Cook’s misconduct or ineffective performance as a Board member that would justify her removal.»
This ruling allows Ms. Cook to continue her role while her legal battle unfolds.
The case may potentially reach the Supreme Court.
Despite President Trump’s persistent calls for rate cuts by the Fed, the central bank has hesitated due to concerns about inflation stemming from the ongoing trade war. The imposition of higher tariffs has led to increased prices.
President Trump has also urged Fed chair Jay Powell to step down, although he later retracted his threats of dismissal.
Amid a weakening job market, attributed in part to the trade war, the president might see his wish for rate cuts granted this month as hiring has declined.
Unlike the Bank of England, the US central bank is tasked with both maximizing employment and controlling inflation.
Even if a rate cut occurs, the Trump administration’s attempts to influence monetary policy are unlikely to cease.
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The Federal Reserve’s independence in setting interest rates free from political pressure is vital for market stability and inflation control.
Both the Fed and the White House refrained from commenting on the court’s decision.
Ms. Cook’s attorney, Abbe Lowell, remarked, «This ruling underscores the significance of safeguarding the Federal Reserve’s independence from unwarranted political influence.»