What's happened
As of January 23, 2026, President Donald Trump is engaged in an unprecedented effort to reshape the Federal Reserve by attempting to remove Governor Lisa Cook and pressuring Chair Jerome Powell. Powell faces a criminal investigation over Fed building renovations, which he calls politically motivated. The Supreme Court is hearing arguments on Cook's firing, while Senate Republicans defend Powell's independence amid escalating tensions.
What's behind the headline?
Political Pressure Threatens Fed Independence
President Trump's campaign to control the Federal Reserve represents a significant challenge to the institution's historic autonomy. His attempt to remove Governor Lisa Cook—the first Black woman on the Fed's board—over contested allegations is unprecedented in the Fed's 112-year history. The Supreme Court's apparent reluctance to allow her firing underscores the judiciary's recognition of the Fed's unique status.
Criminal Investigation as a Political Tool
The Justice Department's grand jury subpoenas and potential criminal charges against Chair Jerome Powell, related to a $2.5 billion Fed building renovation, appear to be a strategic move to intimidate the Fed into aligning with Trump's economic agenda. Powell's public condemnation of these actions as "pretexts" highlights the politicization of what should be an independent monetary authority.
Bipartisan Defense of the Fed Chair
Despite Trump's pressure, Senate Republicans—including some of his staunchest allies—have rallied around Powell, emphasizing the importance of an independent Fed. This bipartisan support complicates Trump's efforts to install loyalists like Kevin Hassett or Kevin Warsh, whose differing economic philosophies could shift monetary policy dramatically.
Economic and Political Implications
If Trump succeeds in gaining control over the Fed, it risks undermining investor confidence, potentially triggering inflationary pressures reminiscent of the 1970s. The Fed's independence is crucial for maintaining economic stability and credibility. The ongoing legal battles and political maneuvers will shape U.S. monetary policy and have far-reaching consequences for the economy and global markets.
Outlook
The Supreme Court's upcoming decisions and Senate confirmations will be pivotal. Powell's term as chair ends in May 2026, but he can remain on the board until 2028, potentially blocking Trump's majority control. The Fed's future independence hinges on these developments, with significant implications for interest rates, inflation, and economic growth.
What the papers say
The New York Times highlights Powell's rare public defiance against what he calls a "nuclear option" by Trump, emphasizing the unprecedented nature of the criminal probe and its threat to Fed independence. According to AP News, the Supreme Court is actively considering Trump's attempt to fire Governor Lisa Cook, with justices signaling reluctance to allow such a politically motivated removal. Al Jazeera reports on Powell's increased public support, including his attendance at Supreme Court hearings and backing from global central bank leaders. The Guardian features a joint statement from all living former Fed chairs condemning the investigation as an attack on institutional independence, warning of "highly negative consequences" if politicization continues. Business Insider UK and The Independent provide detailed accounts of the renovation project's cost overruns and the Justice Department's subpoenas, including statements from U.S. Attorney Jeanine Pirro defending the legal process. Politico and AP News cover the political fallout, noting Senate Republicans' defense of Powell and the potential impact on Trump's Fed chair nominee Kevin Hassett. Together, these sources paint a picture of a constitutional and economic crisis unfolding, with the Fed's autonomy at stake amid intense political pressure.
How we got here
The Federal Reserve, designed to be independent from political influence, has faced intense pressure from President Trump since before his second term. Trump has criticized Fed Chair Jerome Powell for not cutting interest rates aggressively and has sought to remove Governor Lisa Cook over unproven mortgage fraud allegations. The Justice Department's criminal probe into Powell over costly Fed building renovations marks a new escalation in this conflict.
Go deeper
- What are the legal grounds for firing a Federal Reserve governor?
- How does the Federal Reserve's independence affect the economy?
- What could happen if Trump gains control over the Fed?
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