Trump pressure and legal probes leave rate call in the background
Jerome Powell is defending the US Federal Reserve’s independence from the front row of the US Supreme Court, as judges weigh whether US President Donald Trump can fire one of his own central bank governors.
According to CNBC, Powell called the Lisa Cook case “perhaps the most important legal case in the Fed’s 113-year history” and said it “might be hard to explain” if he did not attend the hearing.
He also pointed to former Fed chair Paul Volcker, who “famously” went to a Supreme Court case in the 1980s, as precedent for his presence.
The case tests whether Trump can remove Fed Governor Lisa Cook, who faces mortgage fraud allegations she denies.
Supreme Court justices appeared sceptical of Trump’s claim that he acted within his powers and raised concerns about what such a precedent would mean for Fed independence.
Critics argue the move appears tied to Trump’s push for lower interest rates rather than the unproven allegations.
Powell has framed the fight as a defence of institutional credibility, not personal power.
He said “the point of independence is not to protect policymakers or anything like that,” but to preserve an “institutional arrangement” in which elected officials do not directly control monetary policy.
He warned that if the Fed loses that separation, “it would be hard to restore the credibility of the institution,” and noted that monetary policy can be used “through an election cycle to affect the economy in a way that will be politically worthwhile.”
That battle has drawn attention away from what would normally dominate market focus: the latest rate call.
The Federal Open Market Committee kept its benchmark rate at 3.5 percent to 3.75 percent, saying economic activity is “expanding at a solid pace” and unemployment is showing “some signs of stabilisation.”
Powell said “many of my colleagues think it’s hard to look at the incoming data and say that policy is significantly restrictive at this time,” and described the current level as “loosely neutral.”
The Financial Times reported that there were two dissents in favour of another quarter‑point cut, from Governor Christopher Waller, one of four remaining candidates to replace Powell as chair, and Governor Stephen Miran, a Trump ally.
Powell said there was “broad support on the committee for holding today, including among nonvoters,” as per CNBC.
Trump, meanwhile, has intensified public pressure for cheaper money and new leadership.
He has repeatedly called for rates as low as 1 percent and claimed that level would cut US government financing costs by hundreds of billions of dollars, according to the Financial Times.
He told reporters “I’d like to see rates go down” and accused Powell of wanting “to keep rates as high as possible,” while promising to name a replacement soon, as reported by the New York Times.
The ongoing speculation over Powell’s successor has become so public that it has spawned its own betting market.
Against that backdrop, Powell faces a criminal investigation tied to his testimony on the Fed’s US$2.5bn headquarters renovation.
According to CNBC, he said the US Department of Justice served the Fed with grand jury subpoenas threatening a criminal indictment related to that appearance.
He argued that “the threat of criminal charges” stems from the Fed setting rates based on “what will serve the public” instead of the President’s preferences.
The probe is continuing and that the Fed has not yet complied with the subpoenas.
With his term as chair ending in May and Trump free to appoint a successor at any time, Powell offered one short piece of guidance to whoever comes next: “Don’t get pulled into elected politics. Don’t do it,” he said.
