The Federal Reserve governor Lisa Cook will sue the Trump administration over its bid to fire her over unconfirmed allegations of mortgage fraud, her attorney has said.Donald Trump announced he was firing Cook on Monday night, in an extraordinary move that marks the latest escalation in the US president’s attack on the central bank’s independence.But Trump has “no authority” to remove her from the Fed’s board of governors, Cook’s attorney, Abbe Lowell, argued in a statement to reporters, saying: “His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis.We will be filing a lawsuit challenging this illegal action.”In the meantime, she plans to stay put on the Fed’s powerful board of governors – and rate-setting policy committee.

In its own statement, the Fed said Cook had signaled that she would “seek a judicial decision that would confirm her ability to continue to fulfill her responsibilities as a Senate-confirmed member of the Board of Governors of the Federal Reserve System,” adding: “As always, the Federal Reserve will abide by any court decision.”Trump is pressing ahead, suggesting he will move quickly to replace Cook.“We have some very good people for that position,” he told reporters, suggesting Stephen Miran, one of his economic advisers, was under consideration for the role.He wrote to Cook on Monday, telling her that he was removing her from her position “effective immediately”, based on the allegation from one of his allies that she had obtained a mortgage on a second home she incorrectly described as her primary residence.Cook responded several hours later through Lowell’s office, saying of Trump that “no cause exists under the law, and he has no authority” to remove her from the job to which she was appointed by Joe Biden in 2022.

She said: “I will continue to carry out my duties to help the American economy.”Lowell said Trump’s “demands lacked any proper process, basis or legal authority”, adding: “We will take whatever actions are needed to prevent his attempted illegal action.”Trump posted the full text of the letter on social media.In it, he said that he had found “sufficient cause” in the allegation against her to remove her from her position.Cook’s exit would allow Trump to tap a replacement, helping him to exert more control over Fed policy.

His demands for lower interest rates have so far fallen on closed ears.The Trump administration has pursued several of the president’s political enemies, including the New York attorney general, Letitia James, and the California senator Adam Schiff, over claims of mortgage fraud.Both James and Schiff have denied the allegations.Cook is not a politician, but is among a string of senior Fed policymakers who have defied Trump’s persistent calls for rate cuts.She became the first Black woman to sit on the central bank’s board when she was appointed to a term that was not due to end until 2038.

A respected economist, with stints at Harvard University and Stanford University, Cook served on the council of economic advisers under Barack Obama.In May, the US supreme court suggested the president did not have the power to fire, without cause, governors of the US central bank – an independent agency whose members do not serve at the pleasure of the president.The administration’s attack on Cook’s future at the Fed was led by Bill Pulte, a Trump-appointed official leading the US Federal Housing Finance Agency, who alleged she had claimed two different properties were her primary residences when obtaining mortgages in 2021.“How can this woman be in charge of interest rates if she is allegedly lying to help her own interest rates?” Pulte wrote on X, formerly Twitter.He referred the case to the Department of Justice for investigation.

Trump seized on the claims before Cook had responded, writing on Wednesday on Truth Social, his social network, that she “must resign, now!!!”The Senate Democratic leader, Chuck Schumer, criticised Trump’s move against Cook,“Donald Trump is playing a dangerous game of Jenga with a key pillar of our economy,” he said,“This brazen power grab must be stopped by the courts before Trump does permanent damage to national, state and local economies,And if the economy comes crashing down, if families lose their savings and Main Street pays the price, Donald Trump will own every ounce of the wreckage and devastation families feel,”The Fed chair, Jerome Powell, signaled on Friday that the Fed was gearing up to start cutting interest rates as soon as next month, but reiterated warnings about the potential risks posed by Trump’s policies, including sweeping tariffs and an immigration crackdown, on the economy.

“This year, the economy has faced new challenges.Significantly higher tariffs across our trading partners are remaking the global system,” Powell said in a closely scrutinized speech to other central bankers gathered in Jackson Hole, Wyoming.“Tighter immigration policy has led to an abrupt slowdown in labor force growth.”Top Democratic lawmakers furiously denounced Trump’s attempt to fire Cook.Elizabeth Warren, a Massachusetts senator and ranking member on the Senate banking, housing and urban affairs committee, called it “the latest example of a desperate president searching for a scapegoat to cover for his own failure to lower costs for Americans”.

“It’s an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court,” Warren said.Economists and experts also decried the move, warning that the ramifications of Cook’s attempted firing could reach Americans’ pocketbooks.Rohit Chopra, the former director of the Consumer Financial Protection Bureau under Biden, accused the White House of seeking to “transform the financial regulators from independent watchdogs into obedient lapdogs that do as they’re told”.Skanda Amarnath, the executive director of Employ America and a former Fed economist, said: “Wrecking institutions with unlawful behavior and pathetic power grabs come with costs to Americans.The dollar continues to weaken as American governance continues to erode.

That means higher prices for all commodities.Chair Powell must ensure that Lisa Cook is not removed as a result of these arbitrary and capricious actions from the president.”