Rate-Cut Chances Seem More Precarious As Fed Officials Rally Behind Powell

Core Viewpoint - The investigation by the Trump Administration into Federal Reserve Chair Jerome Powell appears to be failing in its intent to pressure the Fed into cutting interest rates, as multiple Fed officials have publicly defended Powell and the Fed's independence [2][5][10]. Group 1: Investigation and Response - The Trump Administration's Justice Department issued a subpoena to the Fed for information regarding Powell's June 2020 Senate testimony, which Powell has denied any wrongdoing related to [3]. - Several Federal Reserve governors and regional bank presidents have publicly supported Powell, emphasizing the importance of the Fed's independence from political influence [5][10]. - The pushback from Fed officials may lead to a reluctance to lower interest rates, as they may feel pressured by the Trump administration [6][10]. Group 2: Economic Implications - The ongoing conflict between Trump and Powell complicates the Fed's dual mandate of maintaining low inflation and high employment, adding complexity to the current economic environment [4]. - Traders have adjusted their expectations for interest rate changes, with a significant increase in the likelihood of the Fed keeping rates steady at its March meeting, rising from 58% to 78% following the investigation news [8]. - Experts suggest that maintaining higher interest rates could signal the Fed's commitment to combating inflation and preserving its independence from political pressures [6][10].