US Federal Reserve Governor Lisa Cook has sued the Trump administration in an effort to overturn the president’s attempt to fire her, launching an unprecedented legal battle that could significantly reshape the Fed’s longstanding political independence.

The lawsuit seeks an injunction to block her firing and “confirm her status” as a member of the Fed's governing board.

No president has sought to fire a Fed governor in the institution’s 112-year history until Trump posted a letter on media late Monday saying that Cook was fired.

Trump said the reason for her removal were allegations that she committed mortgage fraud in 2021, before she was appointed to the board.

The US Supreme Court has signalled that the president can’t fire Fed officials over policy differences, but he can do so “for cause,” typically meaning misconduct or neglect of duty. Most legal experts say that a “for cause” removal requires some type of process that would allow Cook to respond to the charges, which hasn’t happened.

Cook has not been charged with any crime.

The law governing the Fed “explicitly requires a showing of ‘cause’ for a Governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not," the lawsuit says.

The president’s decision comes as he has repeatedly attacked Fed chair Jerome Powell and the other members of the Fed’s interest-rate setting committee for not cutting the short-term interest rate they control more quickly. It currently stands at 4.3 percent, after Fed policymakers reduced it by a full percentage point late last year.

Powell signalled last week that the central bank was leaning toward cutting its rate at its next meeting on September 16-17.

Those attacks have opened up the White House to the criticism that its firing of Cook over alleged mortgage fraud is just a pretext to open up another seat on the board for a Trump loyalist. Trump has said he will only appoint people to the Fed who will support lower rates. (AP)