Core Viewpoint - The Federal Reserve is anticipated to maintain current interest rates despite ongoing pressure from President Trump regarding borrowing costs [1] Group 1 - The Federal Reserve's decision to hold interest rates steady reflects its commitment to a stable economic environment [1] - President Trump's relentless criticism highlights the political pressures faced by the Federal Reserve in its monetary policy decisions [1]

Inflation is at the top [music] of everyone's mind right now. Why, you ask. Because when they go to the grocery store, they're worried about paying higher prices for beef, poultry, cereal, toilet paper, paper towels, you name it.Now, we all know that inflation [music] means an increase in price. And we're going to break it down for you right now. There are two primary ways to measure inflation.First up is the CPI or the consumer price index. And the second one is the PCE, the Fed's preferred inflation index ...

The dollar index (DXY00) today fell to a new 4-month low and is down -0.61%. The dollar is being undercut by speculation that the US might coordinate FX intervention with Japan to boost the yen, which would dovetail with Mr. Trump's apparent view that a weak dollar is good for the US as a stimulus to US exports.  US authorities reportedly contacted market participants last Friday to check dollar/yen prices, a possible precursor to intervention. More News from Barchart The dollar is also being undercut ...

Core Points - The Supreme Court is set to hear a case regarding President Trump's authority to fire Federal Reserve Governor Lisa Cook over uncharged allegations of mortgage fraud [1][2] - The outcome of this case could impact the Federal Reserve's independence in setting monetary policy, particularly regarding the ability of a president to remove governors who do not align with their interests [2] - Fed Chairman Jerome Powell is under criminal investigation related to a multi-billion-dollar renovation of the Fed's headquarters, which may be linked to his decision to maintain interest rates that displeased Trump [3][4] Group 1 - Cook was one of the governors who supported Powell in keeping interest rates steady, which led to speculation that her potential firing was due to her refusal to cut rates as Trump desired [4] - If both Cook and Powell were removed, Trump could appoint a majority of the Fed's board, potentially increasing his influence over interest rate decisions [5] - Trump cited allegations from Federal Housing Finance Director Bill Pulte regarding Cook's mortgage applications as the reason for her firing, rather than her stance on interest rates [6] Group 2 - The Federal Reserve Act of 1913 allows only the president to terminate a Fed board member, and such termination must be "for cause," which has historically been interpreted as malfeasance or dereliction of duty [7] - A federal District Court judge ruled that Cook's removal attempt violated the "for cause" provision of the Federal Reserve Act, as the allegations against her pertained to actions taken before her appointment [8] - The Department of Justice's appeal against this ruling was unsuccessful, leading them to request the Supreme Court to take the case, asserting that the president has the discretion to determine "cause" for termination [9]

Core Viewpoint - The Trump administration's attempts to pressure the Federal Reserve into lowering interest rates are unlikely to succeed and may even hinder the anticipated rate cuts for the year [2]. Group 1 - Federal Reserve Chair Jerome Powell has strongly rebutted the administration's influence attempts, indicating a firm stance against external pressures [2]. - The market's reaction to Powell's comments was muted, suggesting that investors may not be overly concerned about the political pressure on the Fed [2].

Economic Outlook - The dollar is experiencing underlying weakness as the FOMC is expected to cut interest rates by approximately -50 basis points in 2026, while the BOJ is anticipated to raise rates by +25 basis points in the same year, and the ECB is expected to maintain current rates [1] - Philadelphia Fed President Anna Paulson forecasts inflation moderation, a stabilizing labor market, and growth around 2% for the year, suggesting modest adjustments to the funds rate may be appropriate later in the year [2] - Minneapolis Fed President Neel Kashkari indicates resilience in the US economy and sees no impetus for immediate Fed rate cuts [2] Dollar Performance - The dollar index (DXY) is down by -0.12%, pressured by a rally in the yen and concerns over Fed independence following comments from Fed Chair Powell regarding potential criminal charges against the Federal Reserve [3] - The dollar is further pressured as the Fed increases liquidity in the financial system, having started to purchase $40 billion a month in T-bills [4] Euro and Yen Movements - The euro is slightly higher, up by +0.09%, due to dollar weakness, although gains are limited by comments from ECB Vice President Luis de Guindos about global uncertainty affecting the Eurozone economy [5] - The yen has rebounded from a 1.5-year low against the dollar, driven by hawkish comments from Japanese officials, with BOJ Governor Ueda noting rising inflation and wages [6] Precious Metals Market - Gold and silver prices are rising, with February COMEX gold up +31.50 (+0.68%) and March COMEX silver up +5.152 (+5.97%), supported by geopolitical tensions and strong demand for safe-haven assets [10][11] - Concerns about the Fed's independence and potential easier monetary policy in 2026 are boosting demand for precious metals as a store of value [13] - Central bank demand for gold remains strong, with China's PBOC increasing its reserves by +30,000 ounces to 74.15 million troy ounces in December, marking the fourteenth consecutive month of increases [14]

Market Overview - US stocks initially opened lower due to concerns about Federal Reserve independence amid attacks from the Trump administration, but later recovered with the S&P 500 and Nasdaq 100 reaching new highs [2][4] - The S&P 500 Index closed up +0.16%, the Dow Jones closed up +0.17%, and the Nasdaq 100 closed up +0.08% [5] - European stocks also rose, with the Euro Stoxx 50 reaching an all-time high, and China's Shanghai Composite climbing to a 10.5-year high [3][8] Sector Performance - Data storage and chip makers led the market rally, with Western Digital up more than +6% and Seagate Technology up more than +5% [13] - Mining stocks surged as gold and silver prices hit all-time highs, with Hecla Mining up more than +8% and Coeur Mining up more than +5% [14] - Credit card companies and bank stocks declined after President Trump announced a potential cap on interest rates, with Synchrony Financial down more than -8% [15] Economic Indicators - The market is focused on upcoming economic news, including CPI and PPI data, with December CPI expected to remain at +2.7% year-over-year [6] - Q4 earnings season is set to begin, with S&P earnings growth projected to increase by +8.4%, excluding major tech stocks which are expected to grow by +4.6% [7] Interest Rates - The 10-year T-note yield rose to a one-month high of 4.205% amid concerns about Fed independence and rising inflation expectations [9][10] - European government bond yields fell, with the 10-year German bund yield down to 2.841% [12]

Core Viewpoint - The Federal Reserve is facing unprecedented legal challenges from the Department of Justice, which has issued subpoenas and threatened criminal indictment against Chair Jerome Powell regarding his testimony about the Fed's building renovations [1] Group 1: Legal and Regulatory Issues - The Department of Justice has served subpoenas to the Federal Reserve, indicating a serious legal confrontation [1] - The subpoenas are linked to Powell's testimony before the Senate Banking Committee concerning a $2.5 billion renovation project, which has drawn criticism from President Trump [1] Group 2: Political Context - This legal action represents a significant escalation in President Trump's ongoing conflict with the Federal Reserve, an independent agency [1] - Trump has consistently criticized the Fed for not implementing more aggressive interest rate cuts, reflecting his dissatisfaction with the central bank's policies [1] Group 3: Market Implications - The renewed conflict between the Trump administration and the Federal Reserve is expected to create volatility in financial markets, particularly affecting borrowing costs for mortgages and other loans [1] - The situation may lead to increased uncertainty in the financial sector as the legal challenges unfold [1]

Core Viewpoint - The Justice Department has threatened the Federal Reserve with a criminal indictment over Fed Chair Jerome Powell's testimony regarding building renovations, marking a significant escalation in the administration's attempts to exert control over the independent institution [1]. Group 1: Federal Reserve's Independence - The independence of the U.S. Federal Reserve is crucial as it wields extensive power over the economy, influencing borrowing costs and economic growth through interest rate adjustments [5]. - Economists favor independent central banks because they can take unpopular measures, such as raising interest rates to combat inflation, without political pressure [6]. - The importance of an independent Fed was solidified after the inflation spike of the 1970s and 1980s, where political pressure led to detrimental economic consequences [7]. Group 2: Political Pressure and Reactions - President Trump has repeatedly criticized Powell for not cutting short-term interest rates and has threatened to fire him, reflecting ongoing tensions between the administration and the Fed [2]. - Trump has accused Powell of mismanaging a $2.5 billion building renovation project, which Powell described as a "pretext" to undermine the Fed's independence [3]. - There is a growing concern among some lawmakers, such as Senator Thom Tillis, regarding the administration's efforts to diminish the Fed's independence [4].

Economic Indicators - The US added 50,000 jobs in December, falling short of economists' expectations of approximately 70,000 positions [3] - The unemployment rate decreased to 4.4% from 4.6% in November, reflecting a stable labor market theme of "no-hire, no-fire" [4] Market Reactions - US stocks showed a slight upward trend, with the S&P 500 increasing nearly 0.2%, the Dow Jones Industrial Average rising 0.3%, while the Nasdaq Composite remained roughly flat [1] - All three major indexes are on track to close the first full week of 2026 higher [1] Tariffs and Trade - The Supreme Court is expected to rule on the legality of President Trump's tariffs, which could have significant implications for US economic strategy and global trade [5] - The ruling will determine whether Trump properly invoked a law meant for national emergencies when imposing global duties [5] Government Actions - President Trump directed Freddie Mac and Fannie Mae to purchase $200 billion in mortgage-backed securities to lower mortgage rates and address affordability concerns [7] - The details surrounding this plan remain unclear, leading to market assessments of potential fallout [7] International Developments - The US is reassessing its approach to Venezuela, with Trump canceling a second wave of attacks in favor of cooperation on rebuilding the country's energy infrastructure [6] - A meeting has been called with global oil majors to discuss the future of Venezuela's significant oil reserves [6]