How Trump’s Fed Attacks Set the Stage for the Central Bank's Biggest Test

Fed Independence & Political Influence - The Fed's independence from the White House relies on norms, not laws, and has been challenged by political interference [1] - Trump's actions, including criticizing the Fed chair and attempting to remove a governor, mark a shift in the relationship between the White House and the Fed [1][2][6] - Political control over interest rates can lead to inflation, as seen in the 1970s when President Nixon pressured the Fed [7][8] Key Events & Potential Changes - 2026 is a crucial year for the Fed, with a Supreme Court case regarding the removal of Fed governors and the end of Powell's term as chair [2][9][11][12] - The Supreme Court's decision on Lisa Cook's removal case will impact the president's power to remove Fed governors [10] - Trump's opportunity to appoint a new Fed chair in May 2026 could significantly reshape the institution [2][11] Fed's Role & Protections - The Fed's primary role is to manage the economy through interest rate adjustments [7] - The Fed's budget independence and the "for cause" removal protection for officials are legal safeguards, though potentially weaker than perceived [9] Financial Implications - Changes to the Fed's structure and independence could have significant ramifications for global finance and investors [13] - The Fed's building project cost overruns were mentioned as a point of contention, with the cost appearing to be about 3.1 billion [3][6]