President Donald Trump suffered a legal setback Tuesday when a federal judge blocked his effort to remove Federal Reserve Governor Lisa Cook, but gained momentum a day later when the Senate Banking Committee approved his nomination of White House economic adviser Stephen Miran to another open seat on the central bank's board.
The divergent developments leave Trump one step closer to reshaping the Fed while also preserving the board's existing balance for the near term. Judge Jia M. Cobb, an appointee of President Joe Biden, ruled that the administration failed to show sufficient cause to remove Cook and did not allow her a formal opportunity to respond to allegations tied to mortgage filings. The White House filed an appeal Wednesday, and legal observers say the case could ultimately reach the Supreme Court.
The Senate Banking Committee's approval of Miran, who was tapped to complete the term of former Governor Adriana Kugler, moves his nomination to the full Senate for expected confirmation. Miran would serve only through January, the remainder of Kugler's term, and has said he plans to retain his position as chair of the White House Council of Economic Advisers if confirmed — an unusual step for a Fed nominee who historically steps down from White House posts before joining the central bank.
Both developments could affect next week's Federal Open Market Committee meeting. The Fed is widely expected to trim its key short-term rate by a quarter-point to roughly 4.1% from about 4.3%, and Miran could, if quickly confirmed, be eligible to participate. Judge Cobb's ruling means Cook also is likely to take part in the meeting unless an appeals court or the Supreme Court issues a stay that would remove her from the board while the case is litigated.
The legal fight centers on the statutory protections afforded to Fed governors. By law, governors are not removable at will and may be dismissed only “for cause.” In her ruling, Cobb said that removals must be tied to malfeasance or misconduct occurring while in office and criticized the administration for not giving Cook an opportunity to answer the charges. The White House has accused Cook of mortgage fraud in connection with two property purchases in 2021, when she said both homes were primary residences — a designation that can affect down-payment requirements and mortgage pricing.
The dispute arrives amid broader questions about the Fed's independence. Presidents traditionally appoint governors who share their economic views, but governors are given staggered 14-year terms to insulate monetary policy from short-term political pressures. Trump already appointed two governors during his first term, Christopher Waller and Michelle Bowman. If Cook remains on the board and other members' terms continue, Trump would need another vacancy to secure a majority among the seven governors. Many governors resign before their terms expire, however, creating additional opportunities for presidential appointments.
Economists and investors have expressed concern that a Fed more closely aligned with the White House could be pressured into keeping rates lower than warranted by economic fundamentals. That, they warn, could boost inflation and ultimately push up longer-term borrowing costs as investors demand higher yields to offset expected price rises.
Most economists say Trump is likely to see the Fed move toward lower short-term rates over time if he succeeds in appointing like-minded governors, but they consider his demand for a three-percentage-point cut from the current level unlikely. "Over time the composition of the Fed aligns with the views of the administration because you pick like-minded people," said Vincent Reinhart, chief economist at BNY, noting the direction of travel is toward lower rates.
The Supreme Court has shown some receptivity in prior cases to broader presidential removal powers, but it has also recognized the Fed as a distinct, "unique, semi-private entity" that may warrant extra protection from at-will removal. The outcome of the Cook litigation could therefore shape the legal boundaries of executive authority over the Fed.
If Cook ultimately keeps her seat, the next clear opportunity for Trump to increase his influence could come in May, when Fed Chair Jerome Powell's term as chair expires. Powell could remain on the board after stepping down as chair — a move that would deny the president an additional appointment — or he could depart entirely, allowing the president to name a successor. Several other governors hold terms extending beyond the remainder of Trump's tenure, though early departures remain possible and have in the past opened pathways for new presidential appointees.
The competing legal and political maneuvers underscore the tension between the White House's interest in steering monetary policy and longstanding efforts to preserve the Fed's independence. With the appeal filed and Miran's confirmation expected in the near term, the coming weeks could determine how much influence the president exercises over the central bank's policy direction during the remainder of his term.