The US Supreme Court has dealt a significant blow to President Donald Trump, ruling that his firing of a Federal Reserve governor was unlawful. The decision, handed down on Monday, restores the governor to the board and reinforces the independence of the central bank. For British observers, this is a stark reminder of the fragility of institutional safeguards when political power is unchecked.
The case centred on Trump's 2023 dismissal of Stephanie Walton, a Democratic appointee to the Fed's Board of Governors. Trump had sought to replace her with a loyalist, arguing that the president had broad authority to remove executive branch officials. But the Supreme Court, in a 6-3 decision, disagreed. Chief Justice John Roberts, writing for the majority, stated that the Federal Reserve's structure as an independent agency was constitutional and that its governors could only be removed for cause, not at the president's pleasure.
The ruling has immediate implications. Walton returns to her post, and the Fed's board composition shifts back. More broadly, it reaffirms that the central bank's monetary policy decisions must remain insulated from political interference. That is a principle the Bank of England has long cherished, and one that has become increasingly contested in the age of populism.
Economists on both sides of the Atlantic welcomed the decision. Dr. Alison Fortnum, a former Treasury official now at the London School of Economics, said: "This is a victory for sound money and credibility. Central bank independence is not a technicality. It is what keeps inflation expectations anchored and protects savers from the whims of politicians."
But the political fallout is enormous. Trump has already railed against the decision, calling it "another example of the deep state protecting their own." His allies in Congress have threatened legislation to restructure the Fed, though such efforts face long odds in a divided chamber. Meanwhile, the ruling could energise debates in other countries where executive attacks on central banks are growing. In Turkey, President Erdogan has long pressured the central bank to lower rates despite soaring inflation. In Hungary, the government has repeatedly meddled with the central bank's independence.
For ordinary families, the ruling may seem remote. But the cost of living is deeply tied to central bank decisions. If the Fed had been stacked with political loyalists, it might have kept interest rates artificially low to boost Trump's re-election chances, stoking inflation and eroding savings. That is exactly what happened in the 1970s, when the Fed bowed to White House pressure and allowed prices to spiral. It took years of painful rate hikes to bring inflation back down.
The decision also highlights a growing asymmetry. In the UK, the Bank of England's independence is statutory but can be amended by a simple majority in Parliament. In the US, the Supreme Court has now placed the Fed's structure beyond the reach of ordinary politics. That gives the Fed more legal protection than the Bank of England enjoys. Whether that is a good thing depends on your view of democratic control versus technocratic expertise.
Walton, for her part, has remained quiet. But her return is a reminder that institutions matter. The fight over the Fed is not over. Trump may yet find other ways to influence monetary policy, through appointments to the board's vacant seats or through public pressure. But for now, the Supreme Court has drawn a line. It is a line that defenders of independent central banks everywhere will hope holds firm.
