Fed avoids shock to independence for now, with Cook to attend meeting; Miran confirmed to open seat

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) -The U.S. central bank opens a two-day policy meeting on Tuesday having skirted, for now, a first-ever effort by the U.S. President to remove a sitting Fed governor, but still facing unprecedented pressure from the White House to bring monetary policy more under the direct influence of the executive branch.

In a 2-1 ruling, a federal appeals court in Washington on Monday said Governor Lisa Cook could remain in her job while litigation over President Donald Trump‘s effort to fire her proceeds, a decision that absent a last-minute intervention by the Supreme Court means she will participate fully at the Fed’s policy meeting this week.

The central bank is expected to cut its benchmark interest rate by a quarter of a percentage point to the 4.00%-4.25% range, a move in the direction Trump has demanded though short of the deep rate cuts the White House wants.

Alongside Cook, the Fed will likely have a new voice around the policy table after the U.S. Senate on Monday confirmed Stephen Miran, currently on leave as the head of the White House’s Council of Economic Advisers, to an open seat on the central bank’s seven-member Board of Governors. Following his 48-47 confirmation Miran is expected to be sworn in for the meeting.

While a rate cut this week would mark the first such move by the U.S. central bank since December, financial markets’ focus may be more fixed on the implications of the ongoing Cook saga for the Fed as an institution and for the direction of monetary policy.

The fact that courts have so far sided with Cook, avoiding the potentially disruptive ouster of an independent policymaker by a sitting president, has limited any market fallout from Trump’s unprecedented decision to say he had “cause” to fire Cook because of allegations she misrepresented information on a mortgage application.

Cook denies any wrongdoing and has not been charged with any offense. The Fed has said it would follow any court ruling on Cook’s status.

A divided three-judge panel ruled that Cook is likely to succeed on her argument that in being fired in a Trump social media post she did not receive constitutionally required due process.

“Before this court, the government does not dispute that it provided Cook no meaningful notice or opportunity to respond to the allegations against her,” Judge Bradley Garcia wrote for the two-judge majority. He did not, however, address what constitutes “cause” for a presidential removal of a Fed governor, a central issue in the case.