The Supreme Court has blocked President Donald Trump's attempt to remove a sitting member of the Federal Reserve, cutting off the easiest route the administration had to interfere with the central bank's operations.
The fight isn't over, but the Fed now has the upper hand.
In a 5-4 decision issued Monday, the Supreme Court upheld the lower courts' rulings that Fed Governor Lisa Cook could continue serving at the central bank as her legal case challenging her potential termination moves forward.
Cook launched her legal battle on Aug. 28 after Trump attempted to remove her from the Fed, alleging she made false claims on mortgage documents prior to her term at the central bank that may have secured her more favorable loan terms.
She argued that her removal violated her right to due process, and that the government hadn't provided sufficient evidence to merit a removal "for cause," as required.
In Monday's decision, the Court found the government hadn't proved it was likely to prevail. Further, the Court rejected the government's "halfhearted contention" that Cook received due process.
"At minimum, Cook was entitled to some explanation of the evidence at issue, some avenue for a response, and a deadline by which a response would be due," the opinion noted.
The ruling -- which wasn't a surprise after justices expressed skepticism about the government's case during oral arguments in January -- provided the central bank with more of a boost than the narrow ruling would imply on first glance. It severely curtailed the ability of a president to quickly remove Federal Reserve officials, and thereby exert its influence over monetary policy, and reinforced the deference due to the independence of the central bank.
"With today's ruling, the Supreme Court shut down the fastest path the White House had for getting control over interest rates," says Claudia Sahm, a former Fed economist now serving as chief economist for New Century Advisors.
A decision in favor of President Donald Trump would have allowed the president to remove any Fed official at will, providing the administration an opportunity to install its own supporters on the board.
That's off the table now, Sahm says. Monday's ruling, though narrow, keeps Cook at the Fed until a lower court rules on merits of the case.
"The fight over Fed independence isn't over. It is now being waged on the Fed's terms," Sahm said.
Beyond the initial win for Cook, Monday's ruling is helpful for the new Fed chairman, Kevin Warsh. It effectively provides him with more job security than afforded to his predecessor, Jerome Powell. But it also means Warsh is leading board members more assured of their job security, writes Michael Feroli, chief U.S. Economist at J.P. Morgan. That could make for some bigger "family fights" and could force Warsh to engage more with committee members to enact changes.
The ruling provided some significant protections to future Fed officials, says Molly Nixon, senior fellow in executive powers at the Cato Institute. The biggest, perhaps, is that the Fed's "for cause" removal is a protected carve-out, a stance in doubt before Monday's ruling.
"This case probably leaves a little bit of room to revisit some specific questions, but it's definitely a win for the Federal Reserve on the recognition that there's something different and historically unique about it that allows for that independence," Nixon said
Additionally, the majority opinion noted that the "for cause" statute requires certain procedures to be followed -- basically, that notice be provided and that officials being targeted for removal be given an opportunity for a hearing of some sort, Nixon says. And the decision to terminate a Fed official can be reviewed by a court -- another aspect that was contested by the government.
"For all practical purposes, independence of the Fed has been preserved for now, and possibly strengthened," says Gary Richardson, economics professor at the University of California, Irvine.
The ruling, paired with the fact that President Donald Trump's pick for Fed chairman has recently taken the reins of the central bank, could forestall further immediate interference.
The carve-outs that the court made for the Fed in Monday's rule should also limit the risk that a Trump-aligned Federal Reserve Board seeks to replace the presidents of the regional reserve banks, writes Jaret Seiberg, managing director at TD Cowen.
But Trump has already vowed to keep litigating the case.
"We will take appropriate action immediately to make sure that someone who has committed wrongdoing will not be making vital decisions concerning the Welfare of the United States of America!" Trump wrote on social media on Monday.
Federal Housing Finance Agency Director Bill Pulte, who made public the claims that Cook sought several mortgages in 2021 for homes in Michigan and Georgia that she listed as primary residences, reiterated on Monday his warnings that Cook will be indicted on a charge of mortgage fraud.
Cook said in a statement Monday that she was grateful for the Court's ruling and said that for as long as she serves at the Federal Reserve, she will "continue to uphold the principle of political independence in service to all Americans."
"Today's ruling affirms a principle that has underpinned sound economic stewardship for generations: that the Federal Reserve must make all its policy decisions guided by evidence and independent judgment, free from political interference," Cook said.
Write to Megan Leonhardt at megan.leonhardt@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
June 29, 2026 17:22 ET (21:22 GMT)
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