Supreme Court Protects Fed Independence in Landmark Ruling, Signaling Limits on Presidential Authority Over Central Bank

The US Supreme Court has refused Donald Trump's attempts to immediately fire Federal Reserve Governor Lisa Cook, in a landmark ruling that limits presidential authority over the central bank and reinforces the institutional independence long regarded as essential to economic stability.

In a 5-4 opinion, the court said that Cook can remain as a governor while she contests unproved allegations of mortgage fraud made by Trump administration officials.

"The court decides this application on the narrow ground that the president failed to afford Cook the procedural protections to which she was entitled by statute. Without such protections, she could not properly dispute the charges the president laid against her," the justices said.

The ruling underscores the court's determination to protect the Federal Reserve, a major institutional victory for the central bank after a year of sustained attacks from the White House. Cook, a Joe Biden appointee whose 14-year term on the Federal Reserve board of governors is scheduled to expire in 2038, is the first Black woman to serve on the Fed's board.

Last August, Trump abruptly fired Cook on social media, claiming he had evidence that she committed mortgage fraud, an illegal practice where a homebuyer lists a second property as a primary resident to obtain a better mortgage rate. Cook denied the allegations and sued the Trump administration, saying it fired her without cause.

The decision represents a notable departure from how the court has generally handled Trump in his second term, which has otherwise allowed the president broad power to carry out his agenda without congressional approval. On Monday, the court ruled that Trump had authority to fire Rebecca Slaughter, a Democratic commissioner on the Federal Trade Commission, before her term ended. The court also allowed Trump to remove a Democratic-appointed member of the National Labor Relations Board, leaving the powerful union board without a quorum needed to decide on labor disputes. The court stripped lower district courts of their power to issue nationwide injunctions and stayed a lower court's ruling that restricted Immigration and Customs Enforcement from using race and ethnicity as the basis for reasonable suspicion in immigration enforcement.

Yet the court seems determined to protect the Fed. The Fed has vast power over the US economy because it sets interest rates, which determine the cost of borrowing money. Cook is one of 12 board members who vote eight times a year on interest rates. Economists widely agree that an independent central bank, removed from the pressure of politics, is essential for a stable economy.

Trump has spent the past year attacking the Fed, demanding loyalty from officials and pushing for lower interest rates. He believes current rates are too high and are stifling economic growth. The independence of the Fed is widely regarded as sacrosanct, but Trump has continued to press for the central bank to follow his will.

Much of his ire has been directed at Jerome Powell, a Fed governor and former Fed chair whom Trump first appointed in 2018. In January, the Justice Department placed Powell under investigation over testimony he gave last summer about renovations at the Fed's headquarters that went over budget. The Justice Department closed the investigation in April after it attracted sharp backlash, but the White House has suggested the inspector general's office is still examining the renovations.

Before Powell's term as chair ended in May, he announced he would remain as a Fed governor—a rare move that signaled his concern over the future of Fed independence—until the White House's investigations into the renovations are "well and truly over with transparency and finality".

Kevin Warsh replaced Powell as chair in May and is expected to be more amenable to interest rate cuts despite potential impacts on prices, which have been rising amid the war with Iran.

The Fed was created in 1913 and while it technically sits inside the executive branch, it has historically been insulated from direct White House and Congressional pressure. The Supreme Court's decision reinforces that institutional separation as foundational to the nation's economic health.