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US President Donald Trump has said he will immediately remove Federal Reserve official Lisa Cook from her position, a major escalation in his battle against the US central bank.
He said there was "sufficient reason" to believe Cook had made false statements on mortgage agreements, and cited constitutional powers which he said allowed him to remove her.
In response, Cook has said Trump has no authority to fire her and she will not resign.
It is an unprecedented move for the president to dismiss a member of the central bank's leadership, and comes as Trump has put increasing pressure on the Fed - especially its chair Jerome Powell - over what he sees as an unwillingness to lower interest rates.
Cook is one of seven members of the Fed's board of governors, and in this position sits on the 12-member committee which is responsible for setting interest rates in the US.
She voted alongside Powell and most other members of the committee to maintain US interest rates at the Fed's last rate-setting meeting at the end of July.
She was appointed by Trump's predecessor, Democrat Joe Biden, in 2022 and is the first African American woman to serve in the role.
Trump's decision to remove Cook will likely raise legal questions, with experts suggesting the White House will need to demonstrate - potentially in court - that it had sufficient reason to fire her.
"President Trump purported to fire me 'for cause' when no cause exists under the law, and he has no authority to do so," Cook said in a statement.
"I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022," she added.
"We will take whatever actions are needed to prevent [Trump's] attempted illegal action," Cook's lawyer, Abbe David Lowell, said.
The Federal Reserve has not yet commented on the president's announcement, which he made late on Monday via his social media platform Truth Social.
He posted a letter addressed to Cook in which he informed her of his decision to remove her from the bank's board of governors with immediate effect.
Trump has also repeatedly floated the possibility of firing Powell.
European markets opened slightly down on Tuesday following Trump's decision while the rate the US government has to pay on its bonds, issued to raise money, increased.
According to Trump's letter, Cook signed one document attesting that a property in Michigan would be her primary residence for the next year.
"Two weeks later, you signed another document for a property in Georgia stating that it would be your primary residence for the next year," the president said.
"It is inconceivable that you were not aware of your first commitment when making the second," he wrote.
The president had called for her resignation last week over the allegation of mortgage fraud, which was first made in a public letter from housing finance regulator, Bill Pulte, a Trump ally, to Attorney General Pam Bondi.
The housing finance regulator called the letter a "criminal referral" and urged the justice department to investigate. It is not clear whether an investigation has been opened.
Cook told the BBC in a statement last week that she learned of the allegations from the media, and the matter stemmed from a mortgage loan application she made four years ago before she joined the central bank.
"I have no intention of being bullied to step down from my position because of some questions raised in a tweet," she said.
"I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts."
If Cook or the Fed resist Trump's decision to oust her, experts suggest it could trigger a standoff between the central bank and the White House. The Fed gained independence from the US government in 1951.
Trump has expressed increasing animosity at Powell, calling him a "numbskull" and a "stubborn moron" because he did not support the president's calls for rapid, large cuts to borrowing rates.
But last week, Powell boosted expectations that there will be an interest rate cut in September. Speaking to central bankers gathered in Jackson Hole, Wyoming, he also argued that the inflationary impact of Trump's tariffs could prove temporary.
The US dollar weakened against major world currencies in Asia trading on Tuesday as investors bet that Cook's replacement would be likely to push for more interest rate cuts.
"[The] key question for markets is if Trump succeeds in replacing Cook, could he reshape the Fed's composition and how would that impact the market's perception on US investibility?," Julia Lee, head of client coverage for FTSE Russell told the BBC.
Shoki Omori, chief strategist at Japanese bank Mizuho, highlighted concerns over the pressure Trump has been putting on Powell in recent weeks.
"Powell as of now seems to be fighting back but whoever comes next may just listen to whatever the White House wants. Not looking good."
