(NewsNation) — A legal battle has begun that will determine the future of how the Federal Reserve operates.
Federal Reserve Governor Lisa Cook is suing the Trump administration over her recent firing and has asked a federal judge to block the decision.
At a hearing Friday morning, both sides presented their arguments before a judge, who did not issue a ruling on whether Cook could remain in her role while the lawsuit is pending.
Cook’s team has been given until Tuesday to respond to a legal claim filed by the government, after which the next steps in the case will be decided.
President Donald Trump announced earlier this week that Cook would be removed from her role for “deceitful and potentially criminal conduct,” after she was accused of mortgage fraud by Bill Pulte, head of the Federal Housing Finance Agency.
Pulte, a Trump appointee, alleged Cook claimed two primary residences to get better mortgage rates.
Cook’s legal team has pushed back on those claims, writing in a court filing that “the mortgage allegations against her are pretextual in order to effectuate her prompt removal and vacate a seat for President Trump to fill and forward his agenda to undermine the independence of the Fed.”
The Fed sets interest rates for the country, and Trump has been pushing the agency to lower interest rates despite the economy’s failure to meet the Fed’s 2% goal of inflation.
Fed chair Jerome Powell has refused Trump’s demands, keeping interest rates steady to combat inflation, though he has suggested rates could be lowered in the future. He has pointed to economic uncertainty from Trump’s sweeping tariffs as a reason against lowering rates.
The president has appeared to be gearing up for a legal battle over Cook’s dismissal.
“You have these mortgage receipts very clearly shown to the president, and he has the cause that he needs to fire this individual,” said White House press secretary Karoline Leavitt. “He laid it out in a letter that he provided to her and to the public as well, and so we’ll continue to fight this battle.”
Cook’s legal team has maintained she did not commit any misconduct.
As tension grows between Trump and the Fed, the president has said he would only appoint Federal Reserve leaders who support lowering interest rates.
He recently appointed a former top White House economic adviser to replace an outgoing Fed governor who left earlier in the month.