{"id":4965,"date":"2026-01-14T12:29:42","date_gmt":"2026-01-14T12:29:42","guid":{"rendered":"https:\/\/marketsfortress.com\/index.php\/2026\/01\/14\/feds-fight-with-doj-could-hurt-prospects-for-more-interest-rate-cuts\/"},"modified":"2026-01-14T12:29:42","modified_gmt":"2026-01-14T12:29:42","slug":"feds-fight-with-doj-could-hurt-prospects-for-more-interest-rate-cuts","status":"publish","type":"post","link":"https:\/\/marketsfortress.com\/index.php\/2026\/01\/14\/feds-fight-with-doj-could-hurt-prospects-for-more-interest-rate-cuts\/","title":{"rendered":"Fed’s fight with DOJ could hurt prospects for more interest rate cuts"},"content":{"rendered":"

The Justice Department\u2019s criminal investigation of the Federal Reserve and Chair Jerome Powell\u2019s willingness to fight back are already shaking Wall Street<\/a>. But Main Street could feel shock waves, too.<\/p>\n

The legal showdown<\/a> makes it less likely that the Fed will lower interest rates this year, according to several analysts. Lower rates could translate into lower borrowing costs for consumers and businesses, helping support economic growth and the labor market.<\/p>\n

<\/div>\n

Powell\u2019s term as chair ends in May. But Friday\u2019s subpoenas to the Fed make it \u201cmore likely that Powell will stay on as a governor to help protect the Fed after his term as chair ends,\u201d Krishna Guha, vice chairman at financial firm Evercore ISI, wrote in a note Sunday. <\/p>\n

Powell could potentially remain chair for longer than expected, too, as Sens. Thom Tillis, R-N.C., and Elizabeth Warren, D-Mass., both said the Senate Banking Committee should block votes<\/a> on any Trump administration nominees to the Fed as the investigation plays out.<\/p>\n

It\u2019s also more likely that a few other members of the board who were appointed during the Biden administration will remain, too. If this happens, the eventual makeup of the committee that sets interests, Guha wrote, \u201cwill almost certainly result in fewer cuts than would otherwise have been the case.\u201d <\/p>\n

Analysts with JPMorgan went further. “We now expect the Fed to stay on hold throughout 2026,” they wrote in a note to investors Monday. <\/p>\n

This would actually undermine one of the Trump administration\u2019s key goals. President Donald Trump is soon expected to nominate a new chair who will likely align with his desire to cut rates more quickly and deeply. He has often attacked Powell for being \u201ctoo late\u201d to cut the Fed\u2019s benchmark rate. Trump nominated Powell for the role in 2017.<\/p>\n

Before three cuts late last year intended to shore up a shaky job market, the Fed had been keeping rates elevated to bring down inflation. Heading into the weekend, before Powell’s announcement about the investigation, markets and the Fed itself were expecting one, perhaps two, rate cuts this year.<\/p>\n

Powell said the threatened charges are related to his prior testimony before the Senate about cost overruns tied to the Federal Reserve\u2019s building renovations. But he described this as a false pretext aimed at pressuring the Fed over its interest rate decisions rather than addressing legitimate oversight concerns.<\/p>\n

\u201cThe threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,\u201d Powell said in a written statement and a rare, direct-to-camera video address.<\/p>\n

Trump, in an exclusive interview with NBC News, denied having knowledge of the subpoenas<\/a>.<\/p>\n

\"Donald
Trump and Powell at the Federal Reserve in Washington in July.<\/span>Andrew Caballero-Reynolds \/ AFP – Getty Images<\/span><\/figcaption><\/figure>\n

The Federal Reserve plays a key role in keeping the U.S. economy on solid footing. It has two main directives, to maintain stable prices by keeping inflation in check, and to achieve maximum, sustainable employment.<\/p>\n

A protracted battle could also undermine global confidence in the Federal Reserve\u2019s independence, the overall stability of the U.S. economy and the U.S. dollar, the world\u2019s reserve currency. The value of the dollar fell early Monday. A weaker dollar makes foreign imports more expensive, giving consumers and businesses less purchasing power, while making U.S. exports worth less around the world.<\/p>\n

When inflation runs too high or the economy grows too fast, the central bank raises rates to slow down borrowing and, consequently, growth. When the labor market shows signs of weakening, the central bank typically lowers rates to help stimulate economic activity.<\/p>\n

Traditionally, the Fed has made these decisions on its own, without input from elected officials, up to and including the president. UBS analysts said “concerns about market reactions and perceptions of institutional independence” could hurt the Fed’s appetite for rate cuts.<\/p>\n

Economists have repeatedly stressed how important central bank independence is to maintaining America\u2019s position as the world\u2019s most trusted destination for innovative companies, entrepreneurs and foreign money. <\/p>\n

“The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence,” several former top economic officials, including every living former Fed chair<\/a>, wrote in a statement Monday.<\/p>\n

If the Fed bows to political pressure instead of acting independently in response to economic conditions, economists warn that it raises the risk that the bank will make policy mistakes, steered by short-term political goals like winning elections.<\/p>\n

\u201cIn case anyone needed any evidence that the central bank\u2019s independence is being compromised, here it is,\u201d longtime Fed reporter and expert Jon Hilsenrath wrote<\/a> on LinkedIn. \u201cIt\u2019s been obvious for a while now, but the stakes are rising.\u201d<\/p>\n

The Fed\u2019s committee that sets policy is scheduled to make its next rate decision Jan. 28.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Justice Department\u2019s criminal investigation of the Federal Reserve and Chair Jerome Powell\u2019s willingness to fight back are already shaking Wall Street. But Main Street could feel shock waves, too. The legal showdown makes it less likely that the Fed will lower interest rates this year, according to several analysts. Lower rates could translate into <\/p>\n","protected":false},"author":0,"featured_media":4966,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":{"0":"post-4965","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business"},"_links":{"self":[{"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/posts\/4965","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/comments?post=4965"}],"version-history":[{"count":0,"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/posts\/4965\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/media\/4966"}],"wp:attachment":[{"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/media?parent=4965"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/categories?post=4965"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marketsfortress.com\/index.php\/wp-json\/wp\/v2\/tags?post=4965"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}