SynopsisThe US Supreme Court has reaffirmed the Federal Reserve’s independence by blocking attempts to allow presidential removal of its governors without a high legal threshold. In a case involving Governor Lisa Cook, the court ruled that dismissal would require proof of serious misconduct tied to official duties while legal proceedings continue.APThe US Supreme Court has reaffirmed the Federal Reserve’s independence by blocking attempts. The US Supreme Court has reaffirmed the independence of the Federal Reserve, offering protection to its policymakers from arbitrary dismissal by the president. However, legal experts say the court's twin rulings this week have also left the central bank increasingly isolated, as it may now stand as the only major federal agency retaining significant insulation from direct presidential control, according to Reuters.In one decision, the court declined to allow President Donald Trump to remove Federal Reserve Governor Lisa Cook while legal proceedings over allegations of mortgage fraud continue. The ruling established that any attempt to dismiss a Fed governor would have to meet a high legal threshold, requiring proof of serious misconduct directly connected to official duties, Reuters reported.Separately, the Supreme Court upheld Trump's dismissal of Federal Trade Commission Commissioner Rebecca Slaughter, overturning a 1935 precedent that had long protected leaders of independent regulatory agencies from removal without cause. The decision significantly expands presidential authority over executive agencies while carving out a notable exception for the Federal Reserve.The ruling comes shortly after Kevin Warsh, a Trump appointee, assumed office as Federal Reserve chair. Reuters reported that the decision removes the immediate risk that Fed governors could face dismissal if relations between the White House and the central bank were to deteriorate, providing greater institutional stability for the Fed's leadership.Legal scholars, however, argue that the court's approach may have weakened the broader legal foundation supporting the Fed's independence. By exempting the central bank while removing similar protections for other agencies, the court has invited fresh debate over whether monetary policymakers should continue to enjoy special constitutional status.Reuters reported that the Federal Reserve's independence has traditionally rested on the principle that monetary policy should remain insulated from short-term political considerations. Economists generally argue that allowing elected governments to influence interest-rate decisions could encourage policies aimed at boosting growth before elections at the expense of higher inflation and reduced market confidence.Unlike most federal agencies, the Federal Reserve operates under a unique governance structure established by the Federal Reserve Act of 1913. Its Board of Governors is appointed by the president and confirmed by the Senate, while the heads of its 12 regional Federal Reserve Banks are selected through local boards. The central bank also finances its operations through its own earnings rather than congressional appropriations, reinforcing its institutional autonomy.According to Reuters, the Supreme Court relied on these structural differences, along with historical arguments dating back to Alexander Hamilton's warnings against political interference in monetary policy, to justify preserving the Fed's special status.Some former policymakers believe the distinction may prove difficult to sustain over time. They argue that while the court has reinforced the Fed's independence for now, treating it differently from other agencies could prompt future legal and political challenges over why the central bank should remain exempt from the broader expansion of presidential authority.The legal battle involving Governor Cook also remains unresolved. Reuters reported that the Supreme Court's decision allows her to remain in office while lower courts examine the merits of the allegations against her. President Trump has indicated he intends to continue pursuing the case, ensuring that the dispute over the limits of presidential authority over the Federal Reserve is likely to continue.Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless(You can now subscribe to our ETMarkets WhatsApp channel)Read More News on(What's moving Sensex and Nifty Track latest market news, stock tips, Budget 2025, Share Market on Budget 2025 and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today. Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price...moreless