FED Governor Lisa Cook Bloomberg via Getty Images

A federal judge has temporarily blocked President Donald Trump from removing Federal Reserve governor Lisa Cook in a ruling that marks the first major test of the U.S. central bank’s independence from the White House.

Trump had announced last month that he had sacked Cook, but the Federal Reserve insisted she remain a Senate-confirmed member of its Board of Governors. Cook subsequently filed a lawsuit challenging the president’s action.

In her ruling on Tuesday, Judge Jia Cobb said the president had not demonstrated that Cook’s work at the Fed justified her removal. “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 judge wrote.

The ruling centres on the interpretation of the Federal Reserve Act, which says governors may only be removed “for cause”. Judge Cobb clarified that the provision applies to misconduct or failure while in office, not personal matters predating an appointment. “The best reading of the ‘for cause’ provision is that the bases for removal of a member of the board of governors are limited to grounds concerning a governor’s behaviour in office and whether they have been faithfully and effectively executing their statutory duties,” she explained.

Trump and Federal Housing and Finance Authority director William Pulte have accused Cook of misrepresenting information on three mortgage applications, which they claim enabled her to access lower interest rates and tax benefits. Cook denies the allegations. Her lawyer, Abbe David Lowell, welcomed the ruling, saying it “reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference.”

The case is historic, as no U.S. president has previously attempted to remove a Fed governor. Analysts say the outcome could determine whether future presidents have the authority to dismiss board members, raising questions about the Fed’s ability to set monetary policy without political influence.

The confrontation also comes amid longstanding tensions between Trump and the central bank. He has frequently criticised the Fed and its chair, Jerome Powell, for holding off on interest rate cuts, arguing that aggressive reductions are needed to counter the effects of his trade tariffs. The Fed has maintained that it must carefully balance growth concerns against the risk of inflation.

The legal battle is expected to proceed through higher courts and may ultimately reach the Supreme Court. In the meantime, Cook will remain in her post as the Fed prepares for a policy meeting next week, where economists anticipate the first interest rate cut since September 2024.

Neither the White House nor the Fed has commented further on Tuesday’s ruling.