Jin Shi Shu Ju·2026-01-14 10:29Core Viewpoint - The U.S. Department of Justice has initiated a criminal investigation into Federal Reserve Chairman Jerome Powell's testimony regarding office renovations, adding uncertainty to monetary policy outlook, although market reactions have been relatively calm [2]. Group 1: Market Reactions - Market response to the investigation has been muted, with the 30-year U.S. Treasury yield rising only about 2 basis points [2]. - This contrasts sharply with last summer's market volatility when President Trump suggested he might dismiss Powell, leading to a significant yield increase of 8 basis points on July 11 and 11 basis points on July 16 [2]. - The probability of Powell leaving the Federal Reserve Board by the end of the year has decreased from 83% to 57% according to Polymarket data [2]. Group 2: Implications for Monetary Policy - The investigation may embolden hawkish members of the Federal Open Market Committee (FOMC), complicating the prospects for a more dovish stance from the next Federal Reserve Chair [3]. - The U.S. Supreme Court is set to hold a hearing on January 21 regarding a case involving Fed Governor Lisa Cook, which may have significant implications for future policy direction [3]. - A negative ruling against Cook could increase the risk of Powell facing removal [3]. Group 3: Economic Indicators and Predictions - Recent lower-than-expected inflation data has raised market expectations for a rate cut by the Federal Reserve, with traders anticipating a cut at the June policy meeting, though the likelihood of a cut in January remains low [3]. - The health of the job market will be crucial in determining whether further rate cuts are necessary, as evidenced by the unexpected drop in the U.S. unemployment rate in December [4]. - Major Wall Street banks, including Morgan Stanley, Barclays, and Citigroup, have pushed back their rate cut predictions to late 2026, while JPMorgan no longer expects a cut in 2026 and anticipates a rate hike in 2027 [4].