Trump suffers Supreme Court setback in bid to fire Fed governor

• Justice Brett Kavanaugh, a Trump appointee, warned that allowing the firing would 'weaken, if not shatter, the independence of the Federal Reserve'
• No president has fired a sitting Fed governor in the institution's 112-year history, which was structured to be independent of political interference
• The dispute comes as Trump has demanded faster interest rate cuts, while Fed chair Jay Powell faces his own criminal investigation and is set to step down in May 2026

Summary

The US Supreme Court has dealt a setback to President Trump's efforts to remove Federal Reserve Governor Lisa Cook from her position, with six of nine justices indicating support for keeping her in office while her legal challenge proceeds.

Key Developments:

The Trump administration attempted to fire Cook, a Biden-era appointee, citing alleged mortgage fraud—claims she strongly denies and which have led to no criminal charges. Markets and analysts widely view the move as part of Trump's campaign to pressure the Fed for interest rate cuts, threatening the central bank's independence.

During Wednesday's Supreme Court hearing, Justice Brett Kavanaugh—a Trump appointee—warned that allowing Cook's removal would "weaken, if not shatter, the independence of the Federal Reserve." At least five other justices expressed skepticism about the firing attempt.

Context:

• No president has fired a sitting Fed governor in the institution's 112-year history
• The Fed cut rates three times in 2025 as employment concerns outweighed inflation worries from Trump's trade tariffs
• Fed Chair Jay Powell, who also faces scrutiny from the administration, is scheduled to step down in May after completing his second term
• Trump faces Republican Senate opposition regarding Powell's successor nomination

Market Implications:

The independence of the US central bank remains at stake. Economists and markets believe prospects for further US rate cuts in 2026 are limited due to strong economic growth, contradicting Trump's demands for accelerated rate reductions.

The justices may deny the administration's emergency appeal, allowing Cook's case to continue in lower courts.