Supreme Court blocks Trump's bid to fire Fed's Cook in 5-4 ruling

The Supreme Court on Monday blocked President Donald Trump's bid to fire Federal Reserve Governor Lisa Cook, a 5-4 ruling that preserves the central bank's independence from political interference in monetary policy.

Chief Justice John Roberts wrote the majority opinion, joined by Justices Sonia Sotomayor, Elena Kagan, Brett Kavanaugh and Ketanji Brown Jackson. The ruling extends protections the Supreme Court signaled in a May 2025 decision, when it allowed Trump to remove two Democratic members of federal labor boards but singled out the Fed as a "uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks," according to that opinion.

The decision leaves Cook, the first Black woman to serve as a Fed governor, in her post while her legal challenge proceeds. Trump had cited unproven mortgage fraud allegations in trying to fire her on Aug. 25, the first attempt by any president to remove a Fed official since the central bank's creation in 1913. Cook's term runs until 2038. U.S. District Judge Jia Cobb had ruled in September that Trump's attempt to remove Cook without notice or a hearing likely violated her due process rights under the Fifth Amendment.

The ruling removes a major risk for new Fed Chair Kevin Warsh, who took office May 22 after the Senate confirmed him. It also insulates the central bank from further political pressure as inflation runs at more than double the Fed's 2% target, raising the likelihood that the central bank will raise rates in coming months rather than cut them as Trump has demanded.

The case represented the biggest challenge to the Fed's independence since its founding. Trump had repeatedly attacked the central bank for not cutting rates fast enough, calling former Chair Jerome Powell a "numbskull" and a "major loser." The Justice Department launched a criminal investigation into Powell over cost overruns in a renovation project at the Fed's Washington headquarters — a probe a federal judge blocked in March and prosecutors dropped in April after Republican Senator Thom Tillis called it a "frivolous assault" on the Fed's independence.

The Supreme Court's decision on Cook came the same day it ruled in a separate case, Slaughter v. FTC, expanding presidential power to remove members of other independent agencies such as the Federal Trade Commission, the Federal Communications Commission and the Securities and Exchange Commission. The contrasting outcomes highlight the court's view that the central bank occupies a unique constitutional position.

Warsh Takes the Helm as Rate Uncertainty Persists

New Fed Chair Kevin Warsh has indicated a sharp break from his predecessor's approach. At his first press conference on June 16-17, Warsh said the central bank had "dropped forward guidance," declining to signal the path of interest rates. The approach will face its first global test Wednesday, when Warsh appears alongside European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada Governor Tiff Macklem at the ECB's annual forum in Sintra, Portugal.

Trump has been more restrained toward Warsh than toward Powell. "Kevin is fantastic, and I want him to do whatever he wants," Trump said on NBC's "Meet the Press" earlier this month. "I don't want to have a big influence on him."

What Comes Next for Fed Independence

Cook's legal challenge will continue in lower courts, but Monday's ruling establishes strong guardrails against presidential removal of Fed governors. The decision also protects Warsh and other board members from the threat of political firing, allowing them to set interest rates based on economic conditions rather than White House pressure.

With inflation running well above target and the labor market showing resilience, investors now see a higher probability of rate increases in the second half of the year. The Fed's next policy meeting is scheduled for late July, when Warsh will face his first major test of whether the central bank can maintain its independence while managing market expectations.

This article is for informational purposes only and does not constitute investment advice.