Preliminary injunction preserves central bank independence as the Federal Reserve heads into a closely watched decision widely expected to deliver 2025’s first rate cut

A federal judge in Washington, D.C., has temporarily blocked President Donald Trump from removing Federal Reserve Governor Lisa D. Cook, handing the central bank official a significant legal victory and allowing her to participate in the Federal Open Market Committee (FOMC) meeting next week. The ruling — a preliminary injunction — pauses the White House’s effort to dismiss Cook and keeps the seven-member Board of Governors intact as policymakers debate whether to cut interest rates for the first time this year. 

U.S. District Judge Jia Cobb concluded that the administration is unlikely to prevail on the merits of its case at this stage because the reasons it offered for Cook’s removal do not satisfy the Federal Reserve Act’s “for cause” standard. The president had cited allegations of mortgage fraud tied to transactions that predated Cook’s 2022 Senate confirmation; Cook has denied wrongdoing. By emphasizing that the cited conduct occurred before her tenure and that the administration had not shown she was unable or unwilling to perform her duties, the court underscored the high bar for ejecting a governor from a body designed to be insulated from day-to-day political pressure. 

The decision lands just days before the FOMC’s September 16–17 policy meeting, one of the most closely watched gatherings in years. Market participants broadly expect a quarter-point reduction in the federal funds rate, with inflation easing toward roughly 3% even as it remains above the Fed’s 2% target. A cut would mark the first of 2025 and signal a cautious turn toward easier policy. 

Beyond the immediate policy implications, the ruling is a milestone for the separation of powers and the norm of central-bank independence in the United States. In more than a century of the Fed’s existence, no president has successfully removed a sitting governor. Legal scholars had warned that a unilateral ouster on contested grounds could chill dissenting views inside the central bank and inject partisan risk premia into financial markets. 

The Justice Department has argued that the president may remove senior officials when credible allegations call their integrity into question, and the White House has said the courts should not second-guess that discretion. But the judge’s order signals that, at least preliminarily, the statutory “for cause” protection for Fed governors cannot be stretched to reach alleged, unadjudicated conduct outside the workplace and before an official takes office. The court also noted that Cook would suffer irreparable harm if excluded from deliberations while the case winds through appeals. 

Cook, an economist and the first Black woman to serve on the Fed’s Board, has framed the removal attempt as a threat to the rule of law and the independence of monetary policy. Her legal team argued that the allegations are unsubstantiated and unrelated to her performance and that removing her would set a precedent enabling presidents of either party to sideline governors whose policy views they oppose. Tuesday’s injunction, they said, restores the status quo until a trial can be held or a higher court weighs in. 

Financial markets took the decision as confirmation that the seven-seat Board — with its mix of views on the pace of easing — will remain stable through the September meeting. While the Fed’s staff and regional bank presidents play a central role in shaping the outlook, governors have permanent votes on the FOMC and influence the balance of risks in the statement, projections and chair’s press conference. Cook has generally supported a methodical approach to policy normalization, emphasizing labor-market healing and financial-stability risks. (Context from reporting across outlets.) 

At the heart of the legal fight is a single clause in the Federal Reserve Act stating that governors may be removed by the president “for cause.” Courts have historically interpreted similar language in other statutes to mean serious neglect of duty, malfeasance, or inability to perform the job — not simple policy disagreement. The administration’s reliance on alleged pre-appointment conduct raised the question of whether such claims, still under investigation, can constitute cause when Congress intended to guard the Fed from political swings. 

The case could ultimately reach the Supreme Court, legal experts say, particularly if an appeals court narrows or expands the definition of cause in the context of an independent agency whose decisions ripple through the global economy. For now, though, the injunction preserves the Fed’s customary footing as it weighs how quickly to move from restrictive policy toward a more neutral stance. 

Next week’s policy choice is finely balanced. Core measures of inflation have decelerated but remain above the Fed’s target, and wage growth has cooled without collapsing. A modest rate cut would acknowledge progress while retaining an option to pause if price pressures re-accelerate. Some officials have signaled concern that cutting too late could tighten financial conditions in real terms as inflation falls, effectively raising rates — a risk to job growth. (Background on expectations.) 

For the administration, the court’s ruling is a setback in an early test of its efforts to reshape the central bank. Officials maintain that safeguarding integrity justifies removal, and they are expected to seek relief from the D.C. Circuit. Yet the optics are delicate: any perception of political interference can itself undermine confidence in the currency and bond market, raising borrowing costs for households and businesses. 

For households, the immediate impact is likely to be modest. Mortgage and auto-loan rates reflect where markets expect policy to be in the months ahead. If investors keep pricing a shallow cutting path that returns the federal funds rate to the low-4% range by year-end, consumer rates should drift lower from recent highs, though they will remain above the ultra-low levels of the early pandemic. (Market expectations referenced above.) 

What happens next procedurally? The preliminary injunction keeps Cook in office while the lawsuit proceeds. The court could set an expedited schedule for briefs and arguments on the merits. Either side may ask the appeals court for a stay, but such requests face a high bar. Separately, the FOMC will release its policy statement and economic projections next Wednesday (September 17), followed by a press conference with the chair — a forum where questions about governance and independence are likely to arise. 

However the litigation unfolds, the episode is a reminder that institutional guardrails matter most in moments of stress. The Fed’s credibility rests on the perception that its decisions are guided by data and its statutory mandate — maximum employment and stable prices — rather than politics. By reinforcing the “for cause” standard, the court’s order buys time for that principle to hold as the central bank navigates the next phase of the cycle.