A federal judge has temporarily halted President Donald Trump’s efforts to dismiss Federal Reserve Governor Lisa Cook, marking an initial defeat for the administration in a landmark legal case that could challenge the central bank’s independence.

US District Judge Jia Cobb issued a preliminary ruling in Washington D.C. stating that allegations of mortgage fraud against Cook, which purportedly occurred before she took office likely do not provide sufficient grounds for her removal. Cook has denied any wrong doing.

In her ruling, Cobb noted, “President Trump has not identified anything related to Cook’s conduct or job performance that would indicate she is harming the Board or the public interest”.

In her ruling, Cobb noted, “President Trump has not identified anything related to Cook’s conduct or job performance that would indicate she is harming the Board or the public interest”.

Trump’s attempt to fire Cook came in late August, but the Federal Reserve has maintained that she remains in her position.

The Fed declined to comment on the ruling, which prevents any actions regarding Cook’s removal while her lawsuit proceeds.

This case is expected to reach the US Supreme Court and would have significant implications for the Fed’s ability to set interest rates independently, a crucial factor in controlling inflation.

Trump has criticised the central bank for not cutting rates aggressively particularly ahead of its upcoming policy meeting on September 16-17.

Cook’s attorney, Abbe Lowell stated “this ruling recognises and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference”.

The law establishing the Fed allows for the removal of governors only “for cause”, but does not redefine the term or outline procedures for such actions. Historically, no president has removed a Fed governor and this legal question remains untested in court.

Judge Cobb concluded that the law suggests a Fed governor can only be removed for misconduct occurring while in office. The allegations against Cook relate to actions taken prior to her Senate confirmation in 2022.

Director of the Federal Housing Finance Authority Trump and William Pulte have accused Cook of misrepresenting properties in mortgage applications, which they claim could have resulted in her receiving lower interest rates and tax credits.

Additionally, the US Justice Department has initiated a criminal investigation in to Cook regarding the mortgage fraud allegations issuing grand jury subpoenas in Georgia and Michigan.

In her lawsuit against Trump and Fed, Cook argues that the claims do not grant Trump the legal authority to remove her and are a pretext for her dismissal due to her monetary policy stance.

She asserts that even if the allegations were true, they would not warrant her removal since they occurred before her Senate confirmation.

The Trump administration contends that the President has broad discretion in deciding to remove a Fed governor and that courts lack the authority to review such decisions.