The Oval Office’s plan to force the Fed into submission is unlikely to work, Wall Street believes. In fact, they fear it may backfire so spectacularly that interest rate cuts which would have happened under Powell will be nixed as the central bank asserts its independence.
Over the weekend, Fed chairman Jerome Powell confirmed the Department of Justice had served the Federal Reserve with grand jury subpoenas relating to his Senate Banking Testimony on the renovation of Fed buildings.
It was a move that realists may have seen coming—after all, Trump has already levelled legal threats against other members of the rate-setting Federal Open Market Committee (FOMC)—but is unprecedented nonetheless. It comes after a year of lobbying by Trump, who wants the FOMC to cut the base rate to foster economic activity and reduce borrowing costs, regardless of the inflation risk.
Throughout 2025, Powell attempted to avoid the political melee, even when Trump threatened to fire him multiple times. The FOMC did deliver rate cuts, though clearly not quickly enough for Trump. The resulting escalation from the White House is further proof of political intervention into the legally independent Fed, analysts and investors agree.
