Market Minute: January 13th, 2026 - Political Pressure and Fed Independence
I am a creature of habit and work out nearly every morning. On the days I work out in our home gym, my routine ends at the kitchen island—granola, yogurt, berries, and the morning news.
This morning, I read several articles about the Department of Justice seeking to issue grand jury subpoenas to the Federal Reserve. According to reports, Chairman Jerome Powell said the subpoenas came with a threat of criminal indictment tied to his June Senate testimony regarding a multiyear renovation of Federal Reserve buildings. On Sunday, Powell stated that the investigation was a “pretext” and part of a broader pressure campaign by President Donald Trump to force the Fed to lower interest rates. While emphasizing his respect for the rule of law, Powell framed the move as unprecedented political pressure on the central bank’s independence.
What Is the Investigation About?
The probe centers on Powell’s testimony regarding cost overruns tied to a $2.5 billion renovation project at the Federal Reserve’s headquarters. The DOJ has cited potential inconsistencies or misstatements in that testimony. Chairman Powell, however, argues the real motive is retaliation for his refusal to adjust interest rates to align with the administration’s preferences.
Political Pressure & Fed Independence
It is no secret that President Trump has long criticized Powell for not lowering interest rates. Powell’s comments on Sunday framed the DOJ action as part of a year-long pressure campaign against the Fed’s independence. It is also fair to say that Republicans are not unified on this issue. Some lawmakers, including Republican Senator Thom Tillis, have stated they would oppose any Trump nominee to replace Powell until the legal matter is resolved.
Market Reaction & What Matters Long Term
It is important to note that, as of this writing, no indictment has been issued; the DOJ has only threatened one. What is concerning is that the subpoenas and potential indictment represent a historic escalation in tensions between the White House and the Federal Reserve. Charman Powell has stated that he will “stand firm in the face of threats” and maintain the Fed’s independence.
When I was reading the news at 7:00 a.m. this morning, Dow futures were down more than 300 points. As I type this at 3:30 p.m. on Monday, January 12th, the Dow, Nasdaq, S&P 500, and Russell 2000 are all positive. Yet another reminder of why market timing rarely works. My guess is that the market does not believe much will ultimately materialize from the noise.
The longer-term concern is more meaningful: the Federal Reserve must remain independent from both the executive and legislative branches. The Fed continues to balance a fragile job market against stubborn inflation within the economy. We believe the Fed will remain data-driven and supportive of employment, but only after carefully weighing accommodation against the risk of reigniting inflation.
We continue to believe in an independent Fed—and this will be yet another source of market volatility. Stay tuned!
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