published<\/a> Wednesday. The president signaled that the investigation could alter his stance, saying it is \u201ctoo early\u201d to determine whether the findings might provide grounds to remove Powell.<\/p>\n\u201cRight now, we\u2019re (in) a little bit of a holding pattern with him, and we\u2019re going to determine what to do,\u201d Trump said. \u201cBut I can\u2019t get into it.\u201d<\/p>\n
Federal law permits the president to fire Federal Reserve governors only for cause, not over policy disagreements, a provision that has drawn renewed scrutiny as the probe intensifies and Trump considers whom to nominate as the Fed\u2019s next chair.<\/p>\n
<\/p>\n
The Justice Department recently served the Federal Reserve with grand jury subpoenas related to its $2.5 billion headquarters renovation and Powell\u2019s congressional testimony about the project. Powell has accused the administration of using the investigation as a pretext to pressure the central bank over interest-rate policy.<\/p>\n
\u201cThis is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions \u2014 or whether instead monetary policy will be directed by political pressure or intimidation,\u201d Powell said Sunday.<\/p>\n
Trump dismissed Republican concerns that the investigation is intended to influence rate policy. \u201cI don\u2019t care,\u201d the president said when asked about GOP lawmakers who called the probe politically motivated. \u201cThey should be loyal. That\u2019s what I say.\u201d<\/p>\n
Despite the controversy, Trump said he plans to nominate Powell\u2019s successor \u201cover the next few weeks,\u201d even as Senator Thom Tillis, a retiring Republican on the Senate Banking Committee, has threatened to block Fed nominees until the investigation is resolved. Trump praised two potential candidates, White House economic adviser Kevin Hassett and former Fed Governor Kevin Warsh, calling them \u201cvery good.\u201d<\/p>\n
The political turmoil comes as new inflation data suggests the Fed is unlikely to cut interest rates in the near term. Data from the Labor Department showed wholesale prices rising 3% in November and 2.8% in October, figures delayed by the recent government shutdown and released together on Wednesday. Core wholesale prices, excluding food, energy, and trade services, climbed 3.5% over the past year, the steepest increase since March. Economists noted that the reading was largely driven by upward revisions to September data.<\/p>\n
Consumer inflation remained elevated in December, with the core Consumer Price Index rising 2.6% year-over-year, matching its pace from September to November and staying above the Fed\u2019s 2% target. Using the latest consumer and wholesale price data, Capital Economics economist Stephen Brown estimated that the Fed\u2019s preferred inflation gauge, the core Personal Consumption Expenditures index, could rise to 3%, up from an estimated 2.8% in recent months.<\/p>\n
The Fed\u2019s latest Beige Book report showed tariff-related cost pressures emerging across the economy. Some companies that had initially absorbed the added costs have begun passing them on to customers, though retailers and restaurants remain hesitant, according to the report. Businesses expect price growth to moderate later this year but remain elevated overall. Eight of the Fed\u2019s 12 districts reported slight increases in activity in early January, with only one noting a small decline.<\/p>\n
Fed officials are analyzing the inflation data and diverging over how quickly price pressures will ease. Philadelphia Fed President Anna Paulson said she expects tariff-driven goods inflation to fade by mid-year and sees a \u201cdecent chance\u201d that three-month inflation will fall back to 2% by year-end. She anticipates \u201cmodest further adjustments\u201d to interest rates later this year.<\/p>\n
Fed Governor Stephen Miran projects a more aggressive path, forecasting 150 basis points of rate cuts in 2026, far above the median expectation for one 25-basis-point cut, arguing that a lower neutral rate and slower population growth will push inflation down. Minneapolis Fed President Neel Kashkari was more cautious, saying inflation is declining but its trajectory remains uncertain. He warned that cutting rates too quickly could unintentionally worsen inflationary pressures, particularly for lower-income households already strained by higher prices.<\/p>\n
\u201cOverall, the economy seems quite resilient,\u201d Kashkari said. \u201cThat makes me question how tight policy is right now.\u201d<\/p>\n
The Fed is widely expected to hold rates steady at its Jan. 29-30 meeting, maintaining the current range of 3.5% to 3.75% as policymakers await clearer signals from both the economy and the White House, according to market analysts.<\/p>\n
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