Federal Reserve Governor Lisa Cook challenges her dismissal, raising constitutional questions about central bank autonomy

The Federal Reserve, long viewed as the guardian of America’s economic stability, has found itself at the center of a constitutional storm. Governor Lisa Cook, appointed in 2022, has filed a lawsuit against former President Donald Trump after his attempt to remove her from the Board of Governors earlier this month. The move has triggered one of the most consequential legal showdowns in modern U.S. monetary history, with far-reaching implications for the independence of the world’s most influential central bank.

Cook, a respected economist and the first Black woman to serve as a Federal Reserve governor, argues that Trump’s decision violates the Federal Reserve Act, which grants governors fixed terms to insulate them from political interference. Her legal team filed suit in federal court in Washington, D.C., seeking an injunction to block her removal and restore her authority. “The stability of our financial system depends on an independent central bank,” Cook said in a statement. “No president should be able to undermine that principle for political gain.”

The lawsuit comes against the backdrop of Trump’s renewed influence over U.S. economic policy following his political resurgence in 2024. His critics argue that his attempts to pressure the Federal Reserve recall his previous clashes with Chair Jerome Powell, whom Trump repeatedly attacked during his presidency. This time, however, the stakes are even higher: firing a sitting Fed governor could fundamentally alter the balance of power between the White House and the central bank.

Legal scholars describe the case as unprecedented. “We are in uncharted territory,” said Marcia Ellison, a constitutional law professor at Georgetown University. “The law does not clearly spell out whether a president has the authority to fire a Fed governor mid-term. The courts will now decide whether the independence of the Federal Reserve is real or symbolic.”

Markets have reacted nervously to the news. U.S. Treasury yields rose this week amid fears that political control over the Fed could erode investor confidence. The dollar, which has long benefited from global trust in the Fed’s autonomy, slipped slightly against the euro and yen. Wall Street executives privately warn that prolonged uncertainty could spook foreign investors and destabilize credit markets.

Supporters of Trump argue that elected officials should have greater oversight over unelected technocrats. “The Fed has too much unchecked power,” said Senator Richard Hanley (R-TX). “The President is right to assert accountability.” But Democrats, joined by some moderate Republicans, have countered that politicizing monetary policy could lead to runaway inflation or reckless credit tightening.

The Supreme Court, which has weighed in on related issues of administrative independence in recent years, is likely to hear the case if it proceeds through the appellate courts. Analysts suggest the justices could use it as an opportunity to revisit the doctrine of agency autonomy, potentially reshaping not only the Federal Reserve but also other independent regulatory bodies.

For now, Cook remains sidelined, her office sealed as the case proceeds. Yet her lawsuit has galvanized defenders of the Fed’s independence, who warn that the outcome could reverberate well beyond the United States. “Global markets look to the Federal Reserve as a steady hand,” said Martin Kwan, chief economist at HSBC. “If America weakens that independence, it sends a dangerous signal to the rest of the world.”

As Washington braces for months of legal wrangling, one thing is clear: the battle between Lisa Cook and Donald Trump is more than a personal dispute. It is a defining test of whether America’s central bank can remain above politics—or whether the Oval Office will hold sway over the most powerful monetary institution on earth.