By: Aaron Wall, CFA
Partner, Portfolio Manager
This week kicked off with a Sunday afternoon video from Federal Reserve Chairman Jerome Powell responding to Justice Department subpoenas tied to his June 2025 Congressional testimony on the Fed’s headquarters renovation project.
This direct and public rebuke of the administration’s recent attacks on the Fed has been a long time in the making, leaving many expecting a volatile week ahead. Even with this start, the market managed an orderly week of performance. Let’s take a closer look.
What's Next for the Fed?
Many expected long-term interest rates (read: the 10-year Treasury) to gain some steam, but yields appear to be closing out the week within just a few percentage points of where they started.Some leaders in Congress were quick to push back against the Justice Department’s actions, with threats from both sides of the aisle to delay confirmation of the next Fed chair, which is set for May, if this process is not abandoned.
It’s important to note that although Powell’s term as chair is up in May, he remains a member of the board until 2028. It’s common practice for the outgoing chair to also resign from their board seat, but one has to wonder if Powell will continue to serve out his term to provide some stability in the organization given the recent pressures it has faced.
The Fed’s independence shifts back into the spotlight just as the Supreme Court is set to begin oral arguments next week over Fed Governor Lisa Cook’s potential dismissal from the board. This case will be incredibly important to determining how the Supreme Court will treat the Federal Reserve as a quasi-independent organization.
If all of this wasn’t enough fuel to the fire, the Fed holds its next meeting January 25-26. We’ll be following these developments closely.
