A federal appeals court has decided that President Donald Trump may not dismiss Federal Reserve board member Lisa Cook from her position.
The split decision on Monday represents a setback to Trump, as it means Cook can remain in place for the key Fed policy meeting on Tuesday and Wednesday, where the board are expected to lower US interest rates.
Trump declared in August that he was dismissing Cook, alleging she had engaged in financial misconduct. Cook denied the claims and stated that the president lacked authority to remove her.
This case has significant ramifications for the Fed's ability to set interest rates free from interference from elected officials.
Cook is a member of the board tasked with setting interest rates in the United States.
When US lawmakers established the Fed in 1913, it incorporated provisions to preserve its autonomy from politics. No US leader has previously removed a Fed board member.
The statutes invoked by Trump to justify his attempt to fire Cook had never been challenged in a judicial setting. The Trump team is expected to challenge Monday's decision to the highest court.
Under the law that established the Fed, its governors may only be dismissed by a president with justification, though the law does not clarify the phrase nor outline procedures for removal.
Cook, a Biden appointee and the first black woman to hold office as a Fed board member, filed a lawsuit against Trump in August, arguing she was being targeted due to her economic stance.
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 consistently demanded significant rate cuts and has criticized Fed Chair Jerome Powell over his handling of monetary policy.
A rate cut is anticipated this week, however, in an effort to stimulate a slow US job market.
On Monday, Trump reiterated his call for a large interest rate cut, posting on his Truth Social platform that Fed Chair Jerome Powell "needs to cut interest rates, now, and larger than he had in mind."
